Health Savings Account
A Health Savings (HSA) is a benefit that is frequently offered with the Employer’s qualified High Deductible Health Plan.
An HSA is a tax-advantaged employee-owned account that may be used to pay for qualified medical, dental, vision, and pharmacy expenses for the participant, spouse, and dependents.
A Partner for Your High Deductible Health Plan
Offering a Health Savings Account (HSA) as part of your employee benefits package is a powerful way to help employees save on healthcare costs while providing them with tax advantages.
HSAs are a smart and flexible solution for employees enrolled in high-deductible health plans (HDHPs), giving them the ability to pay for medical expenses tax-free and save for future healthcare needs.
Here’s everything you need to know about sponsoring an HSA plan.
What is a Health Savings Account (HSA)?
A Health Savings Account (HSA) is a tax-advantaged account that allows employees to save and pay for eligible medical expenses with pre-tax dollars.
HSAs are available to employees who are enrolled in a High-Deductible Health Plan (HDHP), providing them with a convenient way to cover out-of-pocket healthcare costs while saving for future medical expenses.
Key Features:
- Pre-tax contributions: Employees can contribute pre-tax dollars to their HSA, reducing their taxable income and saving on taxes.
- Ownership and Portability: Employees own their HSA, meaning they can take it with them if they change jobs or retire.
- Tax Benefits: Contributions, earnings, and withdrawals for qualified medical expenses are all tax-free, making it one of the most tax-advantageous savings vehicles available.
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Invest for the Future
Unlike many other types of pre-tax plans, the Health Savings Account is owned by the participant and can be taken with them after employment terminates.
The funds in the HSA can be used to pay for qualified medical, dental, vision, and pharmacy expenses throughout the participant’s lifetime.
After a dollar threshold has been met, funds may even be invested!
Starting at age 65, funds may be withdrawn for any reason and are taxed as income. Expenditures for qualified expenses are tax-free.
Triple Tax Savings
- Employee contributions are tax-free.
- Investments grow tax-free.
- Reimbursements for eligible expenses are not taxed.
Eligible Expenses
HSAs can be used to pay for a wide range of qualified medical expenses. Some examples of eligible expenses include:
- Medical Care: Doctor visits, hospital stays, surgery, and preventive care
- Prescription Medications: Any prescription drugs and insulin
- Dental and Vision Care: Routine checkups, fillings, glasses, contacts, and LASIK surgery
- Over-the-Counter Medications: Medicines like pain relievers, allergy medications, and other eligible items (with a prescription)
- Other Qualified Expenses: Chiropractic care, physical therapy, mental health counseling, and more
Eligibility
Employers
- Employers can save on premiums by switching to a high deductible health plan (with an HSA) from a low deductible plan.
- Since employee contributions reduce taxable income, the Employer’s FICA/FUTA is reduced.
Participants
Only employees who are enrolled in the qualified High Deductible Health Plan, are not covered by any other insurance, and are not currently enrolled in a Health FSA may enroll in an HSA.
HSA eligibility is evaluated monthly and is determined by eligibility on the first day of the month.
Who Can Contribute
How it Works
For Employers
For Participants
The Employer deducts pre-tax contributions from each participant’s paycheck. These funds are sent to EMPOWER to deposit in the participant-owned HSA accounts.
Participants may transfer funds from their old HSAs to their EMPOWER HSA.
Participants may invest their HSA funds after the balance has reached a threshold.
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