The Benefits of a Health Savings Account
On October 15th of every year, we celebrate National Health Savings Account (HSA) Awareness Day! This day is focused on the power of an HSA and its ability to help with employee benefits, such as: managing current health-related out-of-pocket expenses, preparing for unexpected healthcare costs, and planning for retirement.
Giving your employees the tools and resources to save for unexpected or upcoming healthcare expenses can make a significant difference in how they view your company’s benefits, and ultimately how they view the company when thinking about job satisfaction.
In honor of HSA Awareness Day, here are the benefits of an HSA, how it can help your employees save for upcoming healthcare expenses, and how it ensures they’re prepared for the unexpected.
What Is an HSA?
An HSA is like a personal savings account, but for medical expenses. HSAs offer your employees a tax-advantaged way to save and pay for medical costs not covered by a high-deductible health plan. Some common expenses covered under HSAs include:
- Doctor’s office copays
- Health insurance deductibles
How Does an HSA Work?
To be eligible to open an HSA, they’re an employee must be enrolled in an HSA-eligible high-deductible health plan. If eligible, your employee chooses an annual election amount. Then, their money is placed in their account via payroll deduction, online banking transfer, or a direct contribution. Once your employee’s account is funded, they can choose to use the money to pay for current healthcare expenses. For example, an employee with an HSA could use funds from their account to pay for their prescription medications.
What Are the Benefits of an HSA?
An HSA lets your employees set aside pre-tax dollars to cover routine out-of-pocket healthcare expenses. This can save them about 30% on average — while saving you up to 7.65% on payroll taxes. Here are some of the other benefits of an HSA:
- Employees can decide how much money to set aside for their healthcare costs and control how their HSA money is spent. This lets them decide on care based on quality and cost.
- Contributions to HSAs aren’t subject to federal income tax, and the earnings in their account grow tax-free.
- Unspent HSA funds roll over at the end of the year and are available for future health expenses.
- HSAs offer tax-free advances like accelerated funding, so your employees are financially ready for unexpected health expenses.
- Multiple people can make contributions to an employee’s HSA. This includes relatives, you, and anyone else who would want to contribute to their account.