HR Support with Health Savings Accounts

Editor's Note: Educate employees on the value of Health Savings Accounts

Tracy MorleyOverview: Health Savings Accounts (HSAs) offer a convenient, tax advantaged way for individuals to save money to pay for health care expenses. While they function like a personal savings account, the money in an HSA should only be used for health care expenses. Individuals that withdraw funds from an HSA for nonmedical expenses have to pay taxes on the money. Individuals under age 65 will also be subject to a 10 percent penalty for nonmedical withdrawals.

To be eligible for an HSA, an employee must participate in a high deductible health plan (HDHP). As the name indicates, an HDHP is a plan that has a higher deductible than typical health plans. Premiums paid for an HDHP are generally lower than premiums for traditional insurance plans. In many cases, preventive care is covered without a deductible.

HSAs can be funded by both employee and employer contributions. Contributions are subject to annual limits that are indexed for inflation and adjusted each year. The account is owned and controlled by the employee. Unspent money can be rolled over each year, and employees can take the money with them if they change jobs.

Trends: As health care costs continue to rise, many individuals are using HSAs not only for current medical expenses, but also as an investment for future health care costs.

Author: Tracy Morley, SPHR, Legal Editor

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HR guidance regarding the benefits of offering employee Health Savings Accounts.