Health Savings Accounts (HSAs) for Businesses

August 12, 2024

Health Savings Accounts (HSAs) offer a valuable benefit not only for individuals but also for businesses of all sizes. Whether you run a small startup or manage a large enterprise, understanding HSAs and their benefits can enhance your company's health benefits package and provide substantial advantages to both employers and employees.

A Health Savings Account (HSA) is a tax-advantaged savings account designed to help individuals and businesses save for qualified medical expenses. HSAs are paired with High-Deductible Health Plans (HDHPs), and they offer several tax benefits:

• Tax Benefits: Contributions to an HSA are tax-deductible, which reduces taxable income. Additionally, the funds in the account grow tax-free, and withdrawals for qualified medical expenses are also tax-free.
• Portability: HSAs are owned by the individual, not the employer, making the account portable. This means employees can keep their HSA even if they change jobs or retire.
• Rollover: Unused funds in an HSA roll over from year to year, unlike Flexible Spending Accounts (FSAs) which often have a “use it or lose it” policy.

How HSAs Work for Businesses

To offer HSAs to employees, a business must ensure that its health plan meets the IRS requirements for High-Deductible Health Plans (HDHPs). Here’s a step-by-step guide to how HSAs can be integrated into a business’s health benefits strategy:

1. Offer an HDHP: To qualify for an HSA, employees must be enrolled in a High-Deductible Health Plan. For 2024, the HDHP must have a minimum deductible of $1,600 for individual coverage and $3,200 for family coverage.
2. Set Up HSA Accounts: Businesses can work with banks, credit unions, or financial institutions to set up HSA accounts for their employees. These institutions often provide various services and investment options for HSAs.
3. Fund the Accounts: Contributions can be made by employees through payroll deductions. Employers may also choose to contribute to employees' HSAs as part of their benefits package. For 2024, individuals can contribute up to $3,850, families up to $7,750, and those aged 55 and older can make an additional $1,000 catch-up contribution.
4. Utilize the Funds: Employees can use HSA funds for qualified medical expenses, which include doctor visits, prescription medications, and certain over-the-counter items. HSAs can be used directly with an HSA debit card or by reimbursing themselves for out-of-pocket costs.

Benefits of HSAs for Businesses

1. Tax Advantages for Employers:
   • Reduced Payroll Taxes: Employer contributions to HSAs are tax-deductible and not subject to payroll taxes.
   • Lower Health Insurance Costs: Offering HDHPs paired with HSAs can result in lower health insurance premiums compared to traditional health plans.
2. Attractive Employee Benefits:
   • Tax-Free Savings: Employees benefit from tax-free contributions, tax-free growth, and tax-free withdrawals for medical expenses.
   • Flexibility and Control: Employees have greater control over how they use and invest their HSA funds. This flexibility can be appealing in a competitive job market.
3. Long-Term Financial Planning:
   • Rollover and Investment Options: HSAs offer the advantage of funds rolling over year to year, allowing employees to accumulate savings for future medical expenses. Many HSAs also provide investment opportunities, potentially increasing the account balance over time.
4. Enhanced Employee Retention and Satisfaction:
   • Portability and Security: The portability of HSAs means employees retain their health savings even if they change jobs, which can enhance job satisfaction and loyalty.

Key Considerations for Businesses Offering HSAs

1. Understand Contribution Limits:
   • Ensure both the business and employees are aware of annual contribution limits. For 2024, the limits are $3,850 for individuals and $7,750 for families, with a $1,000 catch-up contribution for those 55 and older.
2. Educate Employees:
   • Provide resources and training to help employees understand how HSAs work, including eligible expenses and tax implications. This education can help employees make the most of their HSAs.
3. Investment Options:
   • If offering HSAs, consider choosing a provider that offers investment options for the funds. This can help employees grow their savings over time.
4. Compliance and Administration:
   • Ensure compliance with IRS regulations regarding HDHPs and HSAs. Regularly review and update your health benefits policy to remain compliant and meet employees’ needs.

Health Savings Accounts and Business Strategy

Integrating HSAs into your company’s health benefits strategy can offer significant advantages. For small businesses, HSAs can provide a cost-effective way to offer competitive benefits while managing health insurance expenses. For larger enterprises, HSAs can be a tool for enhancing employee benefits and improving overall job satisfaction.

Take advantage of our expertise and discounted pricing arrangements by setting up your HSA through The CBC Health Insurance Marketplace for Costco Members. We offer discounted pricing for HSA administration, making these valuable benefits more accessible and affordable for your organization.

For more information or assistance setting up HSAs for your business, contact The CBC Health Insurance Marketplace for Costco Members today. Let us help you implement HSAs effectively and enhance your company's benefits strategy.

Brought to you by the insurance professionals at Custom Benefit Consultants, Inc.

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Employees, Organizational Mission, hybrid work models, remote work models, Connecting with Employees