Let’s unpack one of the most widely known, but least understood of all employee benefits - Health Savings Account aka HSAs.
Some basics first:
- HSAs are tax-advantaged savings accounts that allow an employee to set aside pre-tax money to be used for medical expenses
- In order to contribute to an HSA plan, you must be enrolled in an HDHP (High Deductible Health Plan). These are usually plans with deductibles between $1500-$3000, higher than a typical PPO or HMO. Remember, coverage does not kick in UNTIL THE DEDUCTIBLE IS MET for most of these plans
- HSA funds roll over year-after-year! You, the employee, own this account and can take it from company to company. Unlike FSAs, which are owned by the employer and leftover funds go back to the company.
Now let’s get into the ways HSAs can be a great way to avoid (ahem *reduce*) taxes.
- Triple tax advantage: Contributions are pre-tax, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free
- Investment potential: HSA funds can be invested in stocks, bonds, or mutual funds, potentially growing your savings over time
- Flexibility: HSAs can be used for a wide range of qualified medical expenses, including acupuncture, chiropractors, and fertility benefits. Be sure to check whether something is HSA-eligible before paying!
All-in-all, HSAs are a great way to reduce tax liabilities, set aside money for staying healthy, and diversify your portfolio.
If you have any questions on HSAs or want to see if it makes sense for yourself or your employees, feel free to reach out!
