If you're an employer, offering benefits like 401ks, IRAs, and health insurance coverage are often par for the course. As we all know, offering benefits to employees creates higher employee satisfaction, tax incentives, and makes you an attractive place to work. However, there's one benefit that often gets overlooked when employers craft benefits packages for their teams: A Health Savings Account (HSA).
What's an HSA?
An HSA is a triple tax-advantaged savings account that you can use to pay for eligible medical expenses. And although an HSA can certainly be used as a traditional savings account, it particularly shines when account holders use their HSA funds to invest. HSAs are paired with high deductible insurance plans (HDHPs) to help offset the costs incurred under the deductible. Right now, to meet the criteria for an HSA-eligible HDHP, the plan must have an annual minimum deductible of $1,400 for individuals and $2,800 for families.
Here are three reasons why you should consider adding an HSA into your benefits mix:
1. HSAs lower insurance premiums
One of the primary reasons why you may want to offer an HSA to your employees is because they can help you save on health insurance premiums. HSAs are only eligible for those with HDHPs, which carry high deductibles but have much lower monthly premiums. Offering an HSA + HDHP combination means that you can still offer your team a healthcare plan, but both you and your employee can save on premiums and healthcare costs.
2. HSAs reduce taxes
HSAs are renowned for their triple-tax benefits. For employees, this means:
Money goes in pre-tax: If offered by the company, the employee can elect to fund the account via paycheck deductions. If the employee funds with-post tax dollars, they can deduct the amount on their tax returns.
HSA balances grow tax-free: Employees don't pay taxes on account growth (which is why it's such a great tool for investing in high-yielding stocks, ETFs, and mutual funds).
Spend tax-free on qualified items: Employees can use their account funds to spend their pre-tax dollars on eligible medical items tax-free.
HSAs also have significant tax advantages for the employers who offer them. Employers don't have to pay federal income tax, social security, or medicare taxes (commonly known as FICA taxes) on any pre-tax contributions (from the employer or the employee). Why? The IRS doesn't consider those contributions wages, which means you pocket that 7.65%.
3. HSAs increase employee satisfaction
Beyond the significant savings that offering an HSA can bring you and your company, there's another simple reason why HSAs are an employer's friend: They help keep your employees happy. According to a 2020 John Hancock study, 64% of employees said that a financial wellness program made them want to stay with their company and 56% said that it increased productivity. By offering an HSA, you're providing your employees with more opportunities to save for their future while also taking their health into their own hands. Offering HSAs make you a desirable place to work, and will help attract and retain top talent. That sounds like a pretty good reason to say H-S-Yay to us!
