You and your employees can use health savings accounts, otherwise known as HSA accounts, to reach many types of financial goals. That’s because these accounts can help individuals and families maneuver the increasing costs of healthcare. Plus, they benefit employers as well.
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1. Employees Can Use HSA Accounts for Savings
More and more employers utilize high deductible health plans (HDHP’s) in an effort to make workers and employees pay more for healthcare costs. HSA accounts help to offset the higher out-of-pocket expenses this concept requires. HSA accounts then end up being beneficial for both employers and employees. They’re good for employees because all the money in an HSA account stays within the account year after year. This makes HSA accounts useful for growing employees’ savings.
2. HSA Accounts Afford Tax Benefits
Many consider HSA accounts to be the “crown jewel” of plans that help people with healthcare expenses, and with good reason. This is because HSA’s are tax-deferred accounts. What’s more, they offer triple the number of tax benefits that other tax-deferred accounts provide. These three tax benefits are:
- HSA contributions are not taxed.
- These contributions grow without being taxed.
- Qualified distributions for medical expenses are not taxed.
Obviously, these benefits are good for employees. However, they also benefit employers. As an employer, you receive federal income tax deductions for your contributions to employees’ HSA accounts.
To make things easier for employers, certain companies offer HSA software services. The software automates the records and tax-deferring accounts of employees within your business.
3. Not Everyone Is Eligible for an HSA Account
Only employers or employees who have a high-deductible health plan (HDHP) can apply for an HSA account. A few requirements of an HSA are that the person:
- Must have an HDHP that has a minimum deductible of $3,450 for individual coverage and $6,900 for family coverage. (These numbers can change each year.)
- Must not be enrolled in Medicare, TRICARE or another non-HDHP health plan.
- Is not a dependent on someone else’s tax return.
4. They Provide Investment Opportunities
Not many people know that they can invest the funds in their HSA accounts in mutual funds. Some HSA accounts even allow you to invest in low-cost index funds. What’s more, investing in index funds doesn’t require an Ivy League education or hundreds of thousands of dollars, either.
In a nutshell, index funds are one of the easiest (and most popular) options for two primary reasons. The first reason is that they typically require less than 0.2 percent of your account value to own and maintain them. This is called the “expense ratio.” Some stock options, such as certain REITs and ETFs, have more than .50 percent of your account value. This makes owning them expensive.
The second reason index funds are almost a “walk in the park” is because they offer you more global markets on a larger scale. This gives you access to even lower fees and less competition in the market. Nobody needs to tell you what this could mean for income and revenue generation for your business. Your employees will be happy about this, too.
There’s no denying that everyone these days faces numerous unexpected expenses, including expenses for healthcare.
Fortunately, HSA accounts can absorb some of this expense. For example, an HSA account can make you and your employees eligible for dental and vision coverage. IRS Publication 502 states that an HSA account will reimburse these two expenses.
However, be sure not to sign your employees or yourself up for more than one health plan. That’s because in order to be eligible for HSA coverage, a person must not have additional coverage from a plan that pays for their high deductibles.