Top 5 Benefits of a Health Savings Account
How to handle health insurance benefits is a question more than one business owner has wrestled with over the years. You want to help employees as best you can with a rock-solid medical plan, but you also want to do what is best for the company's bottom line. Finding that sweet spot is a lot like finding the perfect Christmas gift. Visit: https://employers.benefitmall.com/blog/2020-hsa-numbers-released-heres-what-you-need-know
How to handle health insurance benefits is a question more than one business owner has wrestled with over the years. You want to help employees as best you can with a rock-solid medical plan, but you also want to do what is best for the company's bottom line. Finding that sweet spot is a lot like finding the perfect Christmas gift. Visit: https://employers.benefitmall.com/blog/2020-hsa-numbers-released-heres-what-you-need-know
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<strong>Top</strong> 5 <strong>Benefits</strong> <strong>of</strong> a <strong>Health</strong> <strong>Savings</strong> <strong>Account</strong><br />
How to handle health insurance benefits is a question more than one business owner has wrestled with over the years.<br />
You want to help employees as best you can with a rock-solid medical plan, but you also want to do what is best for the<br />
company's bottom line. Finding that sweet spot is a lot like finding the perfect Christmas gift.<br />
One option is to combine a high deductible health plan (HDHP) with a health savings account (HSA). This sort <strong>of</strong><br />
combined benefit theoretically reduces costs and gives employees more freedom to determine how they use monies<br />
dedicated to healthcare.<br />
An HSA is effectively a savings account containing money that can only be used to cover qualified healthcare expenses.<br />
Normally it is funded by a combination <strong>of</strong> employer and employee contributions. Employee contributions are made by<br />
way <strong>of</strong> payroll deductions.<br />
Here are the top five benefits <strong>of</strong> the health savings account:<br />
1. Tax <strong>Benefits</strong><br />
There are multiple ways to approach HSAs from a tax perspective. Let us start with pretax contributions. This is normally<br />
how an HSA is funded. For 2019, individuals can contribute up to $3,500 in pretax wages to an HSA. Families can<br />
contribute up to $7,000.<br />
Next up are after-tax contributions. An employee looking to add to an HSA with after-tax contributions can deduct that<br />
money from gross income on his or her federal tax return. Note that regardless <strong>of</strong> how an HSA is funded, earnings on the<br />
account are tax-free. Withdrawals are also tax-free as long as they are used to pay qualifying medical expenses.
2. Other Contributions<br />
HSAs do not have to be funded exclusively by employers and employees. Other people can contribute to an HSA as well.<br />
Annual limits are still in place, but everyone from an employee's parents to her best friend from high school can<br />
contribute to her account if they so choose.<br />
3. Benefit Portability<br />
Unlike health insurance plans, employees own their HSAs. That means the accounts are portable. An employee with<br />
several thousand dollars in his HSA takes that money with him should he change jobs. The new employer can contribute<br />
to the account as well.<br />
4. Rolling over Unused Funds<br />
Even though HSAs come with contribution limits, there is no mandate to actually spend the money. Any money left over<br />
at the end <strong>of</strong> the year automatically rolls into the following year while contribution limits are reset. In simple terms,<br />
employees can continually accumulate funds in their HSAs until a genuine need arises.<br />
There is a caveat here: the IRS considers transferring funds from one HSA to another as a rollover. There are some<br />
conditions on such activity. First <strong>of</strong> all, only one such transfer is allowed per 365 days. So if an employee makes a<br />
transfer on June 1, another transfer cannot be made until June 1 the following year.<br />
The second condition stipulates that the employee must complete the transfer within 60 days <strong>of</strong> withdrawing from the<br />
original HSA. Miss that 60-day deadline and the withdrawn money is now subject to taxation.<br />
5. Qualifying Expenses<br />
Finally, HSAs cover many more qualifying expenses than most people know. You can use money in an HSA to pay for<br />
prescription medications, cover the co-pay for an <strong>of</strong>fice visit, or even pay for tests or treatments your medical insurance<br />
will not cover. And because most HSAs these days issue debit cards, making payment is quite convenient.<br />
Combining HSAs with HDHPs is one way to address the medical plan component <strong>of</strong> your benefits package. It is at least<br />
worth looking into if your company does not currently <strong>of</strong>fer an HSA.