This article was provided by MI Blues Perspectives.
Studies show that a growing number of Americans do not seek treatment for health problems due to cost.
When individuals fail to proactively seek the care they need, it becomes more likely that they will eventually require costlier medical treatment, develop chronic illnesses, and in some cases, need extended time off work.
A health savings account, or (HSA), can help avoid these potential complications.
An HSA is like a personal savings account for qualified medical expenses. It’s a great way for your employees to set aside money for health care expenses so it’s there when they need it. HSAs are owned by your employee and can be funded by them and by you.
How Employers Benefit from Employee HSA Contributions
If you offer an HSA-compatible health plan, also called a high-deductible health plan (HDHP), you can choose to contribute to your employees’ HSAs. Employer HSA contributions can help boost employees’ health care savings and help them afford the care that they and their families’ need. Contributing to your employees’ HSAs is a great monetary benefit to add to your employee benefits package.
Your company can also benefit in the following ways:
Tax advantages: HSA contributions through payroll reduce employer payroll taxes. They also lower FICA, state and federal unemployment, and worker compensation contributions. Plus, your contributions are treated as a deductible business expense, which helps reduce a company’s tax liability while improving its bottom line.
Employee retention: Employer HSA contributions can help increase employee satisfaction. And your contributions add value to your compensation package helping to attract and retain talent.
Motivate HDHP enrollment: Your contributions jump-start your employee’s willingness to enroll in HDHPs and contribute their own funds as well. A 2019 Employee Benefit Research Institute® study showed that when employers contributed to HSAs, total contributions were nearly $400 higher. Your contributions also make HDHPs more attractive financially, especially if you offer multiple medical coverage options.
How Much Can I Contribute to Employee HSAs?
Annual HSA contribution limits are set by the Internal Revenue Service. Employers and employees will be able to contribute significantly more to HSAs in 2023. The IRS announced the annual inflation-adjusted limit on HSA contributions (employer and employee) for self-only coverage will be $3,850 in 2023, up from the current allowed contributions of $3,650.
The HSA contribution limit for family coverage will be $7,750 in 2023, which is up from the current allowed contribution of $7,300. The 2023 adjustments represent approximately a 5.5% increase compared to current contribution limits.
How Can Employees Contribute Funds?
Employers can contribute to funds in three ways:
- Equal contributions per pay period
- One lump sum at the beginning of the plan year
- Lump-sum contribution and equal contributions per pay period
Click here to learn more about HSAs.