5 Things Your Employees Need to Know About HSAs – Apex Benefits

5 Things Your Employees Need to Know About HSAs

Apex Health Savings Account

 

Health care in the U.S. is becoming increasingly more expensive, and many Americans are ill-prepared to pay for out-of-pocket medical costs. According to 2017 data from the Federal Reserve Board, 40 percent of Americans do not have enough savings to cover a $400 medical bill when presented with a health-related emergency.

With increasing health insurance premiums and costs, Health Savings Accounts (HSAs) are gaining popularity. They are powerful savings vehicles that can help employees save for a rainy (health) day.

Here are five things your employees should know about HSAs:

  1. HDHP required. First and foremost, an employee must have a high deductible health plan (HDHP) before obtaining an HSA. An HDHP may come with a high deductible, but lower premiums typically offset costs and save employees money at the end of the year. Not all medical plans with high deductibles are high deductible health plans; HDHPs are specifically defined.
  2. Tax free. HSAs come with a few tax advantages:
    • Tax-free contributions, through a pretax payroll deduction or individual contributions which can be claimed on income taxes.
    • Once money is in the HSA account and starts earning interest, employees won’t be taxed for interest growth, unlike some other types of savings accounts.
    • As long as money in the HSA is used for qualified medical expenses, taxes won’t be applied to payment transactions. HSA distributions used for qualified expenses will never be taxed.
  3. Individually owned accounts. If an employee changes jobs or gets a new health plan, the money in the HSA goes with them. The employee owns the money within the account and can continue to use it.
  4. Funds roll over. At the end of the year, employees may have funds remaining in their accounts. These leftover funds carry over each year and can grow into a sizeable savings fund. Some HSA account holders use the account for additional retirement savings, accruing interest similar to a regular savings account. At age 65, account holders pay ordinary income tax on withdrawals for non-eligible expenses, making it much like a retirement fund as well.
  5. Employer contributions. According to the Apex Benefits 2019 Indiana Benchmarking Survey Report, 65 percent of Indiana employers contribute to employee HSAs – and this is free money employees can put toward medical expenses. Employer contributions are fully vested at the time of contribution and unused funds roll over to the next year as well. This allows employees to keep HSA contributions to use in higher claims years.

To learn more about the value of HSAs, attend the 2019 Benefits Benchmarking Survey Report Reveal on July 19. Register here.

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