An Employer’s Complete Guide to Health Savings Accounts

Jar of coins

As an HR professional, you know health savings accounts (HSAs) offer a triple whammy in savings for your employees. When paired with a high deductible health plan (HDHP), your team members can save on health care costs. When used correctly, it can also be an additional retirement account. Then there’s the triple-tax advantage that only an HSA can offer. Truly, it’s a one-of-a-kind benefit. You just need to make sure employees grasp the ins-and-outs of this important financial resource! Unfortunately, only 11% do.

That’s precisely why we’ve put together the complete guide to health savings accounts. Here, you’ll find everything you need to be an HSA cheerleader for your team. 

  • Want answers to employee FAQs? We got ya’ covered!
  • Need tips on encouraging staff to max out HSA contributions? You’ll find those below. 
  • Wondering if there’s a secret weapon to help you with HSA education? Spoiler alert: there is!

Each section has a link for a resource that provides an even deeper dive into that topic. Bookmark this guide and start spreading the gospel of the HSA. 

HSA 101: Snooze-Proof Health Savings Account Definitions

An essential aspect of ensuring your employees properly leverage their HSA is making sure they understand all the lingo and details. Use this quick list of frequently asked questions as a resource to educate your team on fundamental health savings account definitions. (Feel free to copy and paste these bad boys, we won’t tell!) 

What’s an HSA? 

Health savings accounts allow you to deposit pre-tax dollars from your salary to cover future health-related costs. These accounts roll over each year, can be invested, and double as retirement savings if you don’t spend it. 

How do HSAs work? 

You can contribute to your HSA by deducting pre-tax money from your paycheck. You can then use those funds for health-related expenses. Once you retire, an HSA can be used as a normal retirement account (i.e., not only for health-related expenses). Funds in your HSA can also be invested to earn interest. 

What can you use an HSA for?  

You can use HSA funds to cover out-of-pocket healthcare expenses such as: 

  • Deductibles, copays, or coinsurance 
  • Vision and dental care, or vision supplies
  • First aid or health monitoring supplies 
  • Chiropractic or massage services 
  • Feminine hygiene products
  • Treatment for drug addiction 
  • Fertility or maternity services 

HSAs can also cover your spouse’s or dependent’s health-related expenses—even if they aren’t covered under your health plan. 

For a more in-depth rundown, head over to our full list of health savings account definitions.

HSA Benefits for Employers (And Why They Should be a Top Priority in 2021)

We know health savings accounts offer meaningful savings opportunities for your employees, but there are also several HSA benefits for employers, as well—from payroll tax savings to healthier, more productive employees. But there’s a ton of misinformation and confusion which needs to be cleared up. With that in mind, here are few specific reasons you should focus on HSA education this year:

Save your company money

Employees making the wrong choices for their HSA plans cost their company an average of $1,700 per year. 

Better manage rising healthcare costs

Since 2010, premiums increased by 55% while wages only increased by 27%. HSAs can help you and your employees manage those increasing healthcare costs. 

Highlight missed opportunities

Employees aren’t saving enough in their HSAs to cover out-of-pocket costs. Make sure they understand how much they should be saving for their medical expenses this year. 

Drive better investments

In 2020, only 5% of HSAs were invested. Your employees could be leveraging their account to make money on their money.  

Check out our in-depth blog post to learn even more about HSA benefits for employers.

5 Tips for Boosting HSA Adoption and Contributions

The average employee faces $4,049 in out-of-pocket medical expenses every year—but they’re saving less than $2,000 in their HSAs. That means your employees are missing out on tax savings and other financial benefits, and you’re missing out on payroll tax savings. 

So how do you convince your team to both embrace and max out their HSA? Try these five tips:

1. Show.Them.The.Money.

(Read that in the Jerry Maguire voice). Nothing speaks louder than cold, hard cash. Use graphs, charts, or your fave visual representation of choice to break down how much your employees are losing by not contributing to an HSA. 

2. Encourage per-paycheck contributions

Doesn’t $150 per paycheck sound a whole lot better than $3,600? Frame contributions per paycheck to help employees wrap their head around max amounts—those big numbers can scare them away. 

3. Highlight the retirement advantages

Explain the win-win situation! Any pre-tax money employees contribute to an HSA; they won’t lose. Once they retire, they’ll be able to withdraw (tax-free). On top of that, they can invest that money to earn interest in the meantime. It’s like having money set aside for medical expenses that then turns into retirement savings if you don’t use it. 

4. Use storytelling

Case studies can be very eye-opening. Make sure they tell a story about real people with a financial breakdown of what they save using an HSA. 

5. Try a benefits guidance tool

ALEX is available year-round to employees—not just at open enrollment—and can help them understand HSA benefits on their time, on their device, exactly when they need it. Complement all the hard work and communication of your HR team with a robust, easy-to-use digital platform.

For even more pointers, check out our blog post on boosting average HSA contributions.

The Ultimate Guide to HSA Education

The best way to level up your education is to streamline your HSA communications. While you may think you’re doing a good job, there’s likely room for improvement. Ask yourself:

  • How are you getting information out to your team? 
  • Are you consistently speaking to them or just at open enrollment? 
  • Do your employees have a digital platform to answer questions as they arise (or do you expect them to reach out to an HR team member)? 

Our Ultimate Guide to HSA Education is the perfect place to start; it’s a comprehensive resource that will give you tons of juicy details, resources, and data that you can share with your team to bolster HSA understanding and usage. 

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