Health Savings Accounts (HSAs) can be used to save for both current and future health expenses, demonstrating their value as a tool for physical and financial health today and in retirement. In addition to the triple tax advantage and investment capability that was discussed in yesterday’s article, here are reasons three and four to consider adding HSAs to your employee benefit package.
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HSAs offer additional flexibility and benefits that other retirement accounts don’t.
Yes, HSAs offer a triple tax advantage. And yes, they are a valuable retirement savings tool. But the strengths of an HSA don’t stop there. By offering your employees an HSA, you’re empowering them with additional benefits that they won’t find with other retirement accounts.
HSAs can help minimize the strain of paying for healthcare expenses as they provide a tax-free way to cover these costs. In addition to the medical expenses HSAs cover during an individual’s working years, at age 65, HSAs can be used to pay for Medicare Parts B and D and Medicare HMO premiums tax-free and penalty-free, as well as long-term care insurance premiums. Long-term care insurance premiums are a huge expense for Americans; the Department of Health and Human Services estimates that today’s average 65-year-old has a 70 percent chance of needing long-term care as they age. The HSA is a great way to help alleviate some of the expenses associated with long-term care.
Employees can use HSA funds to reimburse themselves for qualified medical expenses at any time, whether that is the next day or years after the expense was incurred (as long as the required receipt is kept). This flexibility makes the HSA a strong option for individuals in every stage of life, especially retirement.
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HSAs are also a major benefit for employers.
With all of these strengths, it’s easy to see the value HSAs can bring to your employees. But a benefit package that includes HSAs has its benefits for employers, too. Offering HDHPs with an HSA can lead to greater employee engagement and savings for both employees and employers. Employers realize savings by attracting and retaining employees, reducing healthcare spend (premiums and claims), and receiving corporate tax savings. Plus, due to the pre-tax treatment of employer and employee contributions, HSA funding lowers the employer’s payroll, which in turn reduces Federal Insurance Contributions Act tax, state and federal unemployment, and workers’ compensation contributions.
HSA Education Is the Key
The combination of these four key factors exemplifies the value an HSA brings to an employer’s benefits and retirement offering. With the triple tax advantage, investment opportunities, and additional perks for employees and employers alike, an HSA can be a powerful tool for your employees to save for a healthy financial future while also benefiting your organization.
Offering the HSA is just the first step, however. Helping your employees make the most of their HSAs and prepare for retirement also requires education—especially during open enrollment season. This could include communication with employees about the benefits of HSAs, how to use them, any incentive contributions offered, investment options, and more. To further strengthen the education available to your employees, work with an HSA provider that offers informative materials, plan comparison calculators, user-friendly tools, and other educational resources.
For more tips on employee education and fostering success in your consumer-directed healthcare (CDH) benefits, download HSA Bank’s recent white paper, 3 Steps to CDH Success, here: hsabank.com/hrdaily2018. You can also check out HSA Bank’s savings calculator.
Chad Wilkins is the President of the HSA Bank.