Four Key Things An Employer Should Know About an HSA

by | Feb 2, 2022

Over 60 million people in the U.S. are currently covered by a health savings account (HSA) ₁.  Many small and medium businesses offer HSAs as an essential part of their benefits offerings. Employees have realized HSAs aren’t just for paying medical expenses today but also for saving and investing for retirement. And employers can also benefit from offering an HSA to their employees. Read on to find out some key things employers must understand about HSAs: 

Number 1: An HSA is Not an FSA

When you offer an HSA to your employees, make sure you set up a Cafeteria Plan (also known as a Section 125 Plan). To allow your employees the benefit of making pre-tax contributions to your company’s HSA program, your company needs to have this plan in place. 

Without it, your plan could be subject to comparability rules, and your employees can’t make pre-tax contributions to their accounts. 

Number 2: HSA Tax Advantages

Are you looking for a way to boost engagement in your HSA plan? Offering a contribution match could encourage your employees to help them get started.  Like your company’s 401k plan, your business can make matching contributions to your employee’s HSA accounts to encourage maximum participation and pre-tax contributions.

Matching contributions are more effective than account seeding or providing a lump sum of money because it encourages employees to contribute their pre-tax dollars, leading to higher balances and better engagement with their healthcare. 

Number 3:  Invest Your HSA Money

An interesting fact that may not be widely known is that your business can offer employees more than one HSA option. Often, the HSA that comes with your health insurance isn’t the best option. Look around for providers with low-cost investment options, easy-to-navigate websites, and employee tools to help them get the most out of their HSA.

Number 4: You Can Use Your HSA for Others

An incredible tax benefit associated with your HSA program is FICA tax savings.  Unlike 401k contributions, HSA contributions by your business and your employees are free of FICA or payroll tax. That’s 7.65% savings for your business and 7.65% for your employees above and beyond the state and federal tax benefits. As more employees take advantage of your company’s HSA program, those savings add up quickly.

As you can see, while your employees are saving for healthcare expenses now and in retirement, you’ll also be benefiting from the HSA program. 


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