Health Savings Accounts
Your search for a stronger employee benefits package is hampered by health insurance premiums that continue to rise year after year. Fortunately, now you can give your employees another option…Health Savings Accounts (HSA). HSA’s afford you and your employees the opportunity to save money and gain more control over future expenses.
An HSA is a tax-free savings account that your employees can use to save money and pay for qualified health care expenses with tax-free dollars. Plus, unused funds roll over from year to year and continue to earn interest tax-free, increasing the benefit of today’s savings. The best way to think of an HSA compared to your current plan arrangement is to imagine your health plan with no co-pays, everything you do whether it’s an office visit, prescription, or surgery is applied to your deductible. An HSA is really a two part equation, 1. You have the Qualified High Deductible Health Plan (QHDHP) linked with 2. A Savings Account, you and your employees have the ability to set money aside, on a pre-tax basis, into their savings account to pay for any qualified medical, dental, or vision expenses. An HSA truly gives your employees the power to become better consumers of their healthcare.
Your Employees Can Benefit From:
- Tax-free contributions
- Tax-free disbursements
- Tax-free interest earned
What’s In It For You As An Employer?
- Lower Insurance Premiums!
- Lower Payroll and FICA Taxes!
- Increased Employee Morale!
Employees are accustomed to health insurance plans where the true cost of health care services is hidden. If a visit to the doctor only costs $20 out-of-pocket, there is little incentive to worry about whether the visit is really necessary. An HSA, however, with its higher deductibles and no co-pays, encourages more thoughtful use of health care services.
When you move from a typical health care plan to a high-deductible HSA plan, you may save up to 20% on health insurance premiums. Plus, when your employees pay for their benefit premiums and make HSA contributions before taxes are computed, you decrease your payroll and FICA tax obligations.
Employers and Employees have the ability to contribute to an HSA Account. Each company has a unique goal or vision for how they would like their HSA Plan to operate, as well as, the perception they would like to communicate to employees. We believe that it is usually best for an employer to provide some type of funding on behalf of employees within the first couple years of implementation. There are two primary methods for employers to add contributions to their employees’ HSAs:
Contributions Based Upon the IRS’ Comparability Rules
All contributions made to employees must be the same. Variances are allowed only if they are based on employees’ dependency status, Single coverage vs. Family Coverage.
Employers can avoid the IRS’s comparability rules two recommended methods:
- Matching Contributions: If an employee makes HSA contributions via payroll deduction, the employer can match that contribution or a percentage of it.
- Wellness Contributions: If the employer adopts a wellness program, they can base HSA contributions on employee participation in various wellness initiatives. Contributions can be a set dollar amount, or they can be established by implementing a point system with a dollar value assigned to the points being earned. This method is subject to the Section 125 nondiscrimination rules and eligibility requirements. Contributions and benefit tests, as well as key employee concentration tests, must be applied.
Contributions made through Section 125 Plan – Pre-Tax
Governed under Section 125 of the internal revenue code, employee-funded Section 125 Cafeteria Plans help both employers and employees save money by using tax-free dollars to pay for eligible expenses. Every HSA dollar deducted pre-tax through a Section 125 Cafeteria Plan saves the employer matching FICA. Employees will save Federal, State, FICA, and Local tax on any of their voluntary contribution amounts, this is better than contributions to a 401K!
HSA Contribution amounts can be changed at anytime during the plan year. Maybe an employee had unexpected claims arise during the plan year, and they only chose to set a minimal amount aside into their HSA, they can immediately change their election amount so they will have enough set aside in their HSA to cover those particular claims. This is a great benefit when most employee benefits only allow you to make changes once you have had a qualified life status change.
Debit Card Access
BDS offers Debit Card capabilities for employees with HSA Accounts. The Debit Card is through Master Card and works the same way as any debit card an employee may use for their personal checking account. Debit Cards have become a convenient way for employees to fully utilize their HSA funds, without the hassle of submitting paperwork.
Online Account Access
Every employee will have access to their HSA Account via the web or a smart phone app 24/7. The online resources allow employees to view account balances, submitted claims, and tax documentation.
Claims Vault – This is one of the key features offered through our online services; we are the only HSA Administrator that offers this capability because the concept is patented by our software vendor. Every HSA Account has a claims vault feature in which every claim that was ever paid for the life of the account is stored for quick reference. This is very important since HSA’s currently have very liberal regulations. If an employee is ever audited for an amount which they withdrew from their HSA in prior years, they can simply pull those claims up through the claims vault and produce them to the IRS immediately. Otherwise, without this feature, the employee would have needed to save this information on their own.
- We can certify that the health insurance plan you are offering your employees is HSA Compatible.
- Provide contribution management, reducing the exposure of over-contribution
- Certification of medical expenses to ensure tax-free distribution status.
- One point of contact for you and your employees to quickly take care of questions and concerns.
- We work with employees to ensure that they are only spending their HSA dollars on qualified expenses.
- Debit Card capabilities
- Claims Vault
- Online Access
- We are an independent administrator, so you can change insurance plans without having to change your HSA Administrator of Custodian.
Contact Us to learn more about how an HSA or our administration can help you and your employees.