To recruit and retain top talent, your benefits package needs to be competitive. So it’s not surprising that offering robust health care coverage is at the top of the list. Unfortunately, this benefit is also one of the most expensive – for you and your employees.
One way to stand out and potentially cash-in (on the tax savings), is to offer employees a health spending account. Learn how a health savings account (HSA) or health reimbursement arrangement/account (HRA) could be a win-win for everyone.
Is an HSA the way to go?
For those of you who offer a high deductible health plan (HDHP), an HSA can help bridge the gap for meeting the deductible and paying for medical expenses during retirement. In a nutshell:
- HSA contributions can be made by the employer and/or employee but are subject to maximum contribution limits established by the IRS. For 2018, the limits are $3,450 for singles and $6,900 for families.
- Contributions go in tax-free, accounts grow tax-free and withdrawals are tax-free (as long as they’re used for qualified medical expenses or QMEs).
- Funds roll over year after year and can be used as a health care nest egg for QMEs during retirement.
- The employee owns the account so they can take it with them when changing jobs.
Yes, HRAs are still around
HRAs are still an alternative health spending account option. These employer-funded reimbursement accounts help employees with eligible out-of-pocket medical expenses, like insurance premiums. Here are a few ways HRAs differ from HSAs:
- Only employers can contribute to an HRA and there are no contribution limits.
- Reimbursements are non-taxable to the employee and are tax-deductible for the employer.
- Unused funds can roll over or be returned each year, reducing overall funding costs.
- Employers own the account and control the cash until a claim is filed by the employee for reimbursement.
Upsides for everyone
As you can see, HSAs and HRAs can be of tremendous value to you and your employees. For you, these accounts offer tax advantages and give you a competitive edge in building and retaining your workforce. Your participating employees get assistance with their health care expenses and more control over how their health care dollars are spent.
The benefits to you and them don’t stop there! For example, when you pair an HDHP with an HSA, employees are more likely to shop around for the least expensive medical test or procedure. And less expensive health care for them on a regular basis can drive costs down for you, too.
Get in the know
To find out if an HSA or HRA is right for you, contact your broker or account manager.
If you already have an HSA, here’s great information to share with your employees.