As employers continue to look for ways to save money on their health insurance costs, those with a health savings account (HSA) in place might consider dropping this benefit. In fact, one of our most frequently asked questions from employers is along the lines of, “If we drop our HSA, do employees have any other way to get one?”
The answer is yes; employees can still have and contribute to a HSA on a tax-advantaged basis even if you don’t offer one as part of your benefits package. (That is, if they have a HSA-eligible health insurance plan.)
High deductible health plans (HDHPs) are the type of plans that allow people to contribute funds to a HSA to pay for their qualified out-of-pocket medical expenses on a pre-tax basis. If employees already have a HSA with you, they can transfer that money to a new account and can use that money on qualified medical expenses, even if they don’t have a HSA-eligible plan. But in order to contribute more money to the account, they must choose a HSA-eligible plan.
What qualifies as a HDHP?
The numbers change each year, but in 2016 a plan is considered a HDHP if it has a deductible of $1,300 or higher for an individual or a $2,600 deductible or higher for family coverage (more than one person), and an out-of-pocket maximum limit of $6,550 for individual coverage or $13,100 for family coverage.
Where can they get an HSA?
If you’re going to drop your HSA, let your employees know that they can open their own HSA through many major financial institutions, or Gravie can help employees open one with our preferred vendor. At Gravie, we offer HSA Bank, which is a popular option in the industry.
What’s the difference between an employer HSA and an individual one?
The biggest difference your employees will notice between an individual HSA and one offered by an employer is how taxes are handled. When an employer puts money into employees’ HSAs—whether that money is from the employer or whether it’s coming directly from the employee’s paycheck, that money is being deposited tax-free into the account. With an individual HSA, employees make their own contributions and receive the tax benefit at the end of the year when they file their taxes.
How much can my employees contribute to their HSAs?
These numbers may change from year-to-year, but in 2016, an individual can contribute up to $3,350 for the year and a family can contribute up to $6,750 a year. If the employee is 55 years old or turning 55 during the year, they’re eligible for a “catch up” contribution that allows them to deposit an extra $1,000 each year.
Keep in mind that unlike a flexible spending account, the money deposited into an HSA rolls over from year-to-year. Another perk of individual HSAs is that your employees can keep it as long as they choose. They aren’t dependent on their employment, so they won’t have to worry about transferring funds to a new account if they change jobs.
Think your employees could benefit from having access to HSAs? Gravie advisors are available to help them determine if a high deductible health plan and a HSA is right for them. And if it is, we can even set them up with automatic contributions through Gravie, too. Reach us at 844.540.8701 or by filling out our contact form here.
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