Research indicates 70% of employees say benefits are either the most important or a very important factor in accepting a job offer or staying in their current job.1 Health Savings Accounts (“HSAs”) are a benefit that employers that maintain high deductible health plans can offer in an effort to provide a well-rounded benefits package.
Here are five ways HSAs can help your employees:
1. Employees don’t risk forfeiting unused HSA balances at year-end or when retiring or changing jobs
Unlike Flexible Spending Accounts (“FSAs”), HSA balances do not risk forfeiture if they’re not spent; they remain available for use for decades into the future – there’s no deadline to make tax-free withdrawals for qualified expenses, and even in the event of retirement or job change, employees own their HSAs and all of the funds in their accounts.
HSA owners can increase their contributions at any point in the calendar year based on their own needs. This can be useful if they experience an unbudgeted qualified expense, receive a raise or bonus, or change their long-term financial planning strategy.
Employees may use HSA balances for a wide variety of eligible medical expenses, including prescription and nonprescription medications, and expenses relating to medical, dental and vision care.
Typically, HSA administrators or employers set a minimum cash balance that account owners must maintain. Above that threshold, HSA owners can invest their balances in a menu of investment options to match their expected investment time horizon and personal risk tolerance. Invested HSA contributions and any earnings grow tax-free, and when used to pay for eligible medical expenses, HSA withdrawals are tax-free.
In contrast to distributions from a tax-deferred retirement account, HSA balances aren’t subject to required minimum distribution rules. In addition, medicare premiums can be paid by HSAs and, after age 65, HSA balances can be accessed penalty-free for non-medical expenses. Regular income taxes will apply.
A well-structured HSA program may help support the goals of both employers and employees. For employers, one objective is to attract and retain employees, including through offering well-rounded benefit programs. For employees, one goal may be to right-size their medical coverage by building a tax-advantaged account with which to reimburse current and future qualified medical expenses.
As an ABA Retirement Funds Program (“Program”) member, your employees that are enrolled in high deductible health plans have access to the Voya Financial® (“Voya”) HSA through Voya Benefits Company, LLC. Program participants can see their HSA balance included as part of their retirement savings balance in their Program account. For more information on the Voya HSA, email us at contactus@abaretirement.com or visit the Program’s HSA Resource Center.
