HSA’s continue to be relevant, yet most do not take full advantage of the tax benefits
With all the recent news surrounding health care it comes as no surprise that we continue to hear more about Consumer Driven Health Plans, also known as HSA’s or Qualified High Deductible Health Plans. (I do want to take a moment to remind everyone reading this that not all high deductible plans are created equal. HSA qualified plans must satisfy certain requirements for deductibles and out-of-pocket expenses per IRS guidelines in order for the plan to be considered ‘HSA Qualified’).
Whether the focus may be lower premiums, the tax benefits, the ability to build on savings for future expenses or a combination of these, statistics show that more employees are funding their accounts with more money than they are withdrawing.
HSA Tax Benefits
Here are some tax benefits to a Health Savings Account (money goes into and comes out of an HSA tax-free, as long as funds are used to pay for qualified medical expenses):
- Contributions to HSAs are not subject to federal income taxes.* If you’re 55+, there is a catch-up contribution you may be eligible for.
- Distributions from an HSA to pay for qualified medical expenses are tax-free. – Here again I want to share with you that “qualified medical expenses” are defined by the IRS and cover much more than your deductibles and copays. For example: Acupuncture, Dental treatments, Fertility enhancements, Smoking cessation, eye glasses and more!
- Earnings to an HSA from interest and investments are tax-free.
*Contributions to HSAs may be subject to state taxes in Alabama, California and New Jersey.
As advantageous as all of the above is, most employees still do not take full advantage of their HSA Accounts. Recent studies show that account holders are far from maximizing their contributions, only about 13% are contributing the full allowable amount.
As with most benefits, education is the key to understanding and maximizing the advantages of Consumer Driven Health Plans and what they can provide to both employer and employees. Let the Health Savings Associates team show you how.