Win-Win or Bad Bet? HSAs For Small Employers
December 4, 2007
Providing attractive health care benefits doesn’t have to be expensive.
An employer-sponsored HSA can help you share the cost of health care with employees in ways that benefit your employees and your business. HSAs are available to eligible individuals who are covered by an HSA-qualified high deductible health plan (HDHP). Your business can provide HDHP coverage, or employees can obtain the coverage on their own.
Benefits to employers who offer HSAs:
* Share the cost of health care benefits with your employees giving them a way to build a savings account with tax benefits—a win-win for all parties.
* Avoid most of the costs and hassles of administering benefits. Employees self-administer their HSAs, so there is minimal administration for your business.
* Contribute in a lump sum, or any frequency you choose, to your employee’s HSA; also, no minimum contributions are required.
* Enhance your benefits package by adding health care benefits, which will help you attract and retain your employees.
Your employees also benefit from an HSA:
* Affordable health care—Your employees pay less for premiums with an HDHP, and can use their savings to help fund the HSA.
* Tax savings—Pre-tax contributions, tax-free interest earnings and tax-free withdrawals when used for qualified medical expenses.
* Control—Employees have more control over their health care decisions. They decide whether to save the money or use it for medical expenses they want to pay from the account.
* Flexibility—HSA money can be used for a wide range of health care–related expenses not typically covered by other health care accounts, such as purchasing long-term care insurance.
* Ownership—HSA funds are an asset that employees own. They can use it to supplement retirement income.
But for many employers, HSAs can be an extremely bad bet.
Why?
Because the employee owns the HSA account. If they walk, they take the employers contribution with them. So it’s important to work with a Benefits Architect (sm) who understands ALL the pros and cons of the new benefit plan designs that are available.
