Health Savings Accounts (HSA's) combine with high deductible health plans to create a cost-saving medical plan. HSA owners can contribute money tax-free up to certain maximums per year and are able to use checks or a checkcard to pay for many medical expenses not normally covered by traditional health plans.
As an employer, you must offer a high deductible health plan (HDHP) option that is HSA qualified in order for employees to take advantage of this account.
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How Does the Account Work?
The employees are the owners of the accounts. They determine when and how funds are deposited into the account. It is their responsibility to not exceed the annual limits and also to track use of the account through receipts.
Who Can Contribute
Individual account owners, employers and family members may contribute. Total contributions cannot exceed the annual limits.
- Contributions can be made in any form.
- Contributions may be a one-time only rollover from an existing flexible spending account, a health reimbursement arrangement or an IRA.
- Contributions are tax-deductible for the employer or the individual.
*Consult a tax advisor.
- Lower Health Care Premiums - Paired with a HDHP, HSA's can reduce insurance premiums that businesses pay. You may choose to pocket this savings, or contribute a portion of it directly to the employees' HSA accounts.
- Tax Advantages* - Employer contributions are generally treated as part of the provided health plan and excludable from the company's gross income.
- Flexibility - An HSA allows your employees to take control of their health care dollars. They may use their accounts to pay for any qualified medical expense, as defined by the IRS. This often includes items not normally covered by traditional health plans.