5 HSA features that might surprise your employees

The special tax advantages of health savings accounts (HSAs) are not the only reason to encourage employees to use them. HSAs are surprisingly free of many of the restrictions that apply to other types of health benefits accounts.

Some of the unique HSA features include the ability to:

• Change contributions during the year
• Make additional catch-up contributions after age 55
• Contribute to an adult child’s HSA
• Use HSA funds in the future for past qualified medical expenses
• Pay qualified medical expenses for family members not covered by their medical plan

The following five features might make HSAs even more attractive to employees:

1. 01

   HSA contributions can change to meet employee needs

   Employees may change their HSA contribution elections during the year. This differs from other pre-tax health benefits (e.g., medical coverage and health care flexible spending accounts) that require an IRS-qualifying event, such as getting married or having a child, to make a change during the plan year.

2. 02

   HSAs help employees build wealth for retirement

   HSA catch-up contributions for employees age 55 or older are a great way to boost balances and reduce taxes:

   • Employees may contribute an extra $1,000 over the IRS limit in 2022 as long as they turn 55 before the end of 2022.
   • Many couples contribute the family maximum to one spouse’s HSA. Since only the account holder can make catch-up contributions, it can make sense for a spouse over the age of 55 to set up a second HSA and contribute his or her own $1,000 catch-up contribution.
   • According to the Plan Sponsor Council of America 2021 HSA Survey, a majority of employers report that fewer than 10% of employees took advantage of catch-up contributions in 2020.

3. 03

   HSAs help protect adult children

   Adult children covered by an employee’s high-deductible medical plan can have their own HSAs. As long as a covered child is no longer the employee’s tax dependent, he or she can open an HSA, and anyone can contribute to it. This is a great way to provide a safety net for children and encourage them to go to the doctor, as they’ll have a cushion to fall back on.

4. 04

   HSAs can fund other expenses

   A strategy of paying cash for current medical expenses while letting assets inside the HSA grow tax-free can be a boon for those who can do so. Those accumulated HSA funds can later be spent on non-medical expenses like college tuition or a trip around the world, as long as there are receipts from earlier qualified medical expenses to back up these purchases.

5. 05

   HSAs cover the whole family

   HSA account holders can pay for qualified medical expenses of a spouse or dependent even if they are not covered by the employee’s medical plan. For example, an employee with self-only medical coverage can spend HSA funds on medical expenses for his or her spouse and children, even if they aren’t covered by a high-deductible medical plan.

In conclusion

You’ve probably spent time educating your employees about the triple tax advantages of this powerful financial tool. It’s time to take the next step and make sure they know there’s even more they can do with their HSAs to protect themselves and their families, grow their wealth and plan for a prosperous retirement.

Author

---

Lisa Myers

Director of Client Services, Benefits Accounts

email Email

---