Everyone wants to spend less on healthcare. But many employees don’t realize that an HDHP plan with an HSA might be the best deal out there. Some people get scared off by an HDHP’s big deductible, some are accustomed to FSAs, and some just think an HSA seems too complicated.
Using an HSA to pay for health expenses can save your employees an additional 20% on average compared to paying out of their pocket. HSAs give those employees a way to pay for current and future medical expenses—and every dollar they save in their HSA saves your company money on payroll taxes.
For everyone’s sake, here are three things you should be telling your employees:
1. FSAs are rubber, HSAs are glue
Many employees familiar with FSAs will expect that all health care accounts follow the “use it or lose it” rule. To them, saving a lot of money for healthcare will seem like a gamble—since with an FSA, it can be better to save too little than way too much.
Employees need to know that there’s no “use by” date on their HSA. The money they save will stick with them until they need it—this year, next year, or twenty years from now. The HSA is their account, and they’ll carry it with them even if they change jobs or retire. And speaking of retirement…
2. HSAs are a great way to save for retirement
Employees that understand their HSAs still may only think of them as a way to cover their current medical expenses. The sobering reality is that the average couple will have over $240,000 in medical expenses during retirement. An HSA offers a great way to save for those expenses, and other retirement costs.
Not all employees know that HSA savings can be invested—like a 401(k)—and can grow year after year. An HSA actually offers better tax savings than an 401(k) when it’s used to cover medical expenses. What’s more, once you turn 65, your HSA savings can be spent on non-medical expenses, so you can use HSA money to buy yourself those senior-discount skydiving lessons. And speaking of treating yourself…
3. You can pay yourself back with an HSA (thanks, self)
Many employees may worry that they’ll get no benefit from an HSA if they run into medical expenses before they’ve saved enough. An FSA might seem safer since their annual contribution would be available immediately.
But employees can use their HSA to “reimburse themselves” for any out-of-pocket money they spend on medical expenses. So if they spend $100 out-of-pocket on an X-ray in January, they can save some pre-tax money in their HSA during February, and write themselves a check for $100. Employees just need to be reminded that the medical expense has to be from after they opened the HSA—so setting it up right away is critical.
HSAs can save everybody money. Having a solid understanding of the benefits and flexibility of HSAs can help employees realize how easy it is to lower their taxes, cover their medical expenses, and save for the future.
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