It’s easier and more affordable than ever for small businesses to compensate employees. Through all the changing laws and tax-free employment benefit plans, the Health Savings Account (HSA) has emerged as one of the most versatile benefit options on the market. Also known as personal medical savings accounts, they have become one of the best investment tools available, as they are triple-tax advantaged.
HSAs are a valuable benefit for prospective talent, as HSA contributions are tax-deductible for employers. The funds roll over from year to year and belong entirely to the employee.
This business HSA plans for employees guide will break down everything you need to know about how small business HSAs work. We’ll give you straightforward advice on setting up an HSA for your employees and how you can start benefitting your entire company today.
Here’s What You Need To Know About Business HSA Plans For Employees
Before we dive into it, let’s briefly discuss the most important takeaways for small business HSA plans for employees.
First, small business HSA accounts are triple-tax-advantaged. All contributions are tax-deductible, and any earned interest and dividends are tax-deferred. Plus, withdrawals are tax-free if used for qualified medical expenses.
Small business HSAs also have no contribution minimums, which means employers can choose precisely how much to contribute, from $0 to the annual contribution limit. Your employees can decide how much of the remainder to fund, with pre-tax dollars from payroll. For both employers and employees alike, HSA contributions are tax-deductible and can be handled directly through payroll (employers do not have to pay payroll tax on donations made by employees).
Let’s discuss how to set up business HSA plans for employees.
How To Set Up A Small Business HSA
It’s actually relatively simple to set up an employee health saving account. The first step is to determine your plan eligibility and enrolling your team in an HSA-eligible health insurance plan option. If you’re a larger company, this is usually a group-sponsored health insurance plan. Though smaller employers with less than 50 employees aren’t required to offer insurance, they can still provide an HSA-eligible option.
If they don’t want to provide a group health insurance plan, business owners can reimburse their employees for the cost of the HSA-qualified insurance using a small business HRA. An HRA allows the business to reimburse the employee for the cost of individual health insurance, as a tax-free benefit.
Decide How Much To Contribute
Employers decide how much to contribute to business HSA plans for employees. It can be $0 or any amount up to the contribution maximum. Any contributions made towards an employee’s HSA are income tax-deductible, and any amount added by the employee via payroll is not subject to payroll tax.
Encourage Your Employees To Open An HSA
HSAs are owned entirely by the employee. The first step in the process is explaining the tax benefits of HSAs to your team. You can increase participation by going over the basics of how to use an HSA and what expenses are covered with these plans.
The entire HSA creation process is fast and hassle-free, and with most banks and HSA administrators, these accounts can be opened online in about fifteen minutes.
Work With An HSA Administrator
If you choose to contribute towards small business HSA plans for employees, the entire process can be administered by the financial HSA administrator that opened the account. They will help you prepare and deliver the appropriate tax documents as required by the IRA.
Different Ways To Contribute To Small Business HSA Plans For Employees
HSAs are different than other employer-sponsored health benefit programs because of how easily accessible they are. No matter how much you choose to compensate your employees for health care expenses, there is usually a way to make that benefit HSA-qualified.
Here are a few ways to contribute to business HSA plans.
Adding An HSA To Your HRAs
If you want to use a small business HRA like a QSEHRA, employees are required to maintain Minimum Essential Coverage (MEC), as provided with most small group plans.
You can increase the value of your benefits package without increasing your payroll by offering both a small business HRA and employee HSA contributions.
Adding An HSA To Your Small Group Health Insurance Plan
Though small businesses with fewer than 50 employees are not required to offer health insurance benefits, it is a very effective way to enhance your benefits package. It also encourages your employees to be happy, healthy, and possibly even more productive.
Group insurance plans can be a very affordable option for even the smallest company. Even businesses with less than 25 employees and an average salary of less than $50k are eligible for the Small Business Health Care Tax Credit, which can be worth up to 50% of your total contributions.
If you are considering offering a small group health insurance plan, it is a good idea to make sure that at least some of your options are HSA qualified. Even if you don’t want to contribute, you can still provide your employees with a valuable route to ongoing tax savings.
Adding An HSA To A Group Healthshare Plan
If you’re a small business owner, you can offer your employees memberships into a group health care cost-sharing plan. Some health sharing plans are HSA-qualified, making it possible for your employees to open HSAs without having to buy conventional health insurance.
We think that HSAs fit great with health-sharing plans. Both encourage healthy living and inspire personal responsibility when it comes to health care decisions. Health sharing keeps prices low, and HSAs provide that much-needed safety net for deductibles and out-of-pocket expenses. Paired together, your employees can be at ease when medical expenses arise.
Let HSA For America Help You With Business HSA Plans for Your Employees
As health insurance costs continue to rise, Americans across the country are trying to seek out innovative ways to get those bills paid and make sure they are covered. Though Health Savings Accounts are not brand new, they are becoming more and more accessible. Small businesses are starting to reap the benefits and provide better coverage for their employees.
Let the experts at HSA For America be your guide. We’ll help you choose an HSA-qualified plan option, or you’re looking for more info on how to set up an employee HSA, we would love to help!
Click here to schedule a free online appointment, or call 1-800-913-0172.