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Helping employees understand their health savings accounts

By Higginbotham on September 25 , 2018

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Don’t assume your employees understand their health savings accounts (HSAs). According to research conducted by Alegeus, 65 percent of HSA holders lacked the knowledge needed to pass a basic fluency test about their accounts. As a result, many people may be unable to maximize their benefits, leading to higher costs and more frustration than necessary.

To help employees better understand – and use – their HSAs, share these five important facts with them.

Fact #1: HSA funds are great complement to high-deductible health plans.

To qualify for an HSA, you must be enrolled in a high-deductible health plan (HDHP).

For 2019, the IRS defines an HDHP as a health plan with an annual deductible of $1,350 or more and out-of-pocket expenses capped at $6,750 or less for self-only coverage, or an annual deductible of $2,700 or more and out-of-pocket expenses capped at $13,500 for family coverage.

Some people who are young and healthy prefer HDHPs because they generally offer lower premiums compared to other health plans. However, if you experience a major illness or injury, the high deductible can make paying for medical care difficult. This is why it’s smart to have an HSA to complement your HDHP, providing you with a source of funds to cover deductibles and other expenses.

Fact #2: HSA funds can be used in more than one way.

Although you must be enrolled in an HDHP to qualify for an HSA, HSAs do a lot more than pay for expensive deductibles.

HSA funds can be used to pay for a variety of qualified medical expenses, including some that may not be covered by your health plan. This includes dental care, vision care and long-term care expenses, as well as many other medical costs.

Fact #3: HSA funds never expire.

It’s understandable for employees to confuse flexible spending accounts (FSAs) with HSAs, but these two accounts are very different. One key difference is that the funds in HSAs never expire. Although you will no longer be able to make contributions after switching to a plan that is not an HDHP – such as Medicare – you will still have access to your savings.

HSAs are also portable, meaning you can take your account with you when you change jobs or retire.  

Fact #4: HSAs offer tax advantages.

You may wonder why you should use an HSA instead of a regular savings account. The answer lies in the tax advantages of HSAs.

  • The contributions are tax-deductible. For 2019, the contribution limit is $3,500 for self-coverage only and $7,000 for family coverage.
  • The contributions earn interest, and these earnings are tax free.
  • The withdrawals are tax free as long as they’re used to cover eligible medical expenses.

Fact #5: An HSA is an excellent retirement savings tool.

Because HSAs offer tax advantages, and because the funds never expire, they can be used as retirement savings tools. Funds can even be used for non-medical expenses after you turn 65 with no penalty, although the withdrawals will be subject to tax when used for non-medical expenses.

Want to learn more about making HSAs a component of your benefit package? Contact your Higginbotham insurance broker.

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Tags: Employee Benefits

  
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