Health savings accounts (HSA) continue to be attractive to both employers and employees. According to the 2019 Midyear Devenir HSA Market Survey, there are now over 26 million HSAs holding $61.7 billion dollars in assets as of June 30, 2019. That represents a 12% increase in accounts and a 20% increase in HSA assets compared to June 30, 2018.
While National HSA Awareness Day was on October 15, PrimePay believes in promoting the financial wellness benefits of HSAs every day.
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PrimePay helps with the administration of HRAs for your company, no matter the size or choice of plan.
Top 4 HSA Benefits for Employees
1. Three Powerful Tax Benefits
- Pre-tax contributions: You don’t pay taxes (Social Security, Medicare, federal income and depending on the state, state income tax/unemployment) on the money contributed to the account.
- Tax-free growth: If you invest your funds, you don’t pay taxes on the gains.
- Tax-free distributions: When you use funds for qualified expenses, you don’t pay taxes.
2. No Use-It or Lose-It Rule
For many consumers, HSAs may provide greater benefits than traditional flexible spending accounts (FSAs). Like FSAs, your contributions are pre-tax and you may use HSA dollars to pay for eligible health expenses tax-free. But unlike FSAs, there is no use it or lose it rule. Funds roll over year to year and there is no annual rollover limit.
3. Individually Owned by the Employee
HSAs are individually owned, so funds are portable. If an employee leaves his current employer, he will take his HSA account.
4. Quickly Build Funds
Most HSA custodians (the institution holding the account) provide investment options, so when combined with regular contributions, an HSA balance may accumulate quickly.
Savings Power & Beyond
Eligible individuals have a powerful savings vehicle in HSAs. First, eligible individuals can contribute more annually to HSAs than FSAs and second, there is no annual rollover limit on HSA balances. Individuals can quickly accumulate significant balances in their HSA accounts.
Beyond the savings power, individuals still enjoy many benefits.
Individuals don’t pay taxes (Social Security, Medicare, federal income, and depending on the state, state income tax/unemployment) on the money contributed to the account.
These accounts are individually-owned, meaning the employee owns the account. While the IRS determines what qualifies as a qualified high deductible health plan (QHDHP) and what are eligible expenses (ex. 213d Expenses), the account holder controls almost every aspect of the account, from deciding how much to contribute to how to use the funds and when to invest.
Easy Payment Options
Many HSA custodians offer easy payment mechanisms such as account debit cards and online payment features.
Remember, preventative services must be offered at no cost under the Affordable Care Act (ACA). Individuals enrolled in a QHDHP can take advantage of preventative services without paying any deductibles, copays, coinsurance or other cost-sharing requirements when delivered by in-network providers.
Implementing and Managing an HSA Plan
Because these are individual accounts, employers can face challenges when they do not partner with an experienced vendor. PrimePay helps employers navigate through account setup and account funding processes, and if there is an issue with an account, PrimePay can facilitate a resolution between the HSA custodian, the employer, and the account holder.
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Disclaimer: Please note that this is not all inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding specific application of the information to your own plan.