Health Savings Account (HSA)
By offering a Health Savings Account (HSA) as part of your health benefits plan, you are not only providing a valuable benefit to your employees, but your company reaps immediate rewards as well. You can reduce your own health care costs while simultaneously freeing up administration time in human resources. Both the money and time savings can be reinvested into your company and your employees.
Lower Health Care Premiums
Many small- to medium-sized businesses have faced double-digit increases in health care costs. Turning to HDHPs is a way to reduce expenses while still providing a valuable benefit to their employees. Choosing a higher-deductible plan reduces the premiums because medical services that may never be utilized are not being paid for in advance. This savings can be placed in a tax-favored HSA to be used for current and future medical expenses.
Less Administrative Responsibility
Unlike other health care funding options, the funds in an HSA are fully owned by the employee. The employee is fully responsible for the account once it is opened. You have no claims administration issues or adjudication process and you do not have to maintain records for the IRS. This is a tremendous time-saver for your company, and employees have the advantage of being in control of their own healthcare.
Tax Advantages to You
When you make a contribution to an employee's HSA, you may exclude the amount from your gross income. The amount is not subject to withholding for income tax and it is not subject to other employment taxes.
Once again, the benefits work both ways. While you gain tax advantages, so do your employees. The amount they choose to contribute to their HSA is similarly excluded from their income for tax-reporting purposes.
When making contributions to your employees' HSAs, you must follow the comparability rules established under the HSA legislative guidance. For all eligible employees, you must make either the same dollar amount or percentage of deductible in order for the contribution to be considered "comparable." If you are making contributions under a Section 125 Plan, then the comparability rules do not apply, but you must follow the non-discrimination rules of 125 Plans. The employee owns ALL contributions to the account as soon as the funds are deposited.