Health savings accounts (HSAs) are one of the most valuable and versatile tools employees can use to control their health costs — and hold down your insurance premiums. They’re also one of the most underutilized.
In fact, just 5% of employees funded their HSA to the max, according to a recent study by HelloWallet.
Beyond the basics
A big reason for the low contributions is likely due to the fact that staffers aren’t even aware of the many benefits of HSAs. That’s where HR and Benefits pros come in.
On top of the major features – contributions are deductible from gross income, can be carried over in full from year to year – let staff know about these lesser-known advantages:
- HSA funds earn interest and that interest is tax-free. Unlike many accounts that earn interest, employees don’t have to pay taxes on the interest their HSAs earn.
- Funds invested inside an HSA grow tax-free as well. Employees are actually able to invest their HSA funds if the balances is high enough. Like interest the HSA earns, investment returns within the HSA also grow grow tax-free.
- Non-covered services can still be purchased with HSA funds. Many insurance plans don’t cover services such as acupuncture, travel costs (for medical care) and chiropractic visits, but workers can still reap the tax advantages of their HSAs.
- Employees can pay now and cash in whenever they’d like. If workers want to hang on to their qualified healthcare receipts, they can them in for a sizeable payout down the line.
- Changing jobs doesn’t affect an HSA. Granted, you want to keep your staffer long term. But not knowing they can take their HSAs with them in the event of a job change could be impacting their contribution rates.
- Withdrawal penalties disappear eventually. When HSA accountholders hit 65, they no longer get hit with withdrawal penalties (20% plus taxes) for nonqualified medical expenses.