Employer HSA Contributions Benefit Everyone


By MotivHealth

It’s no secret that HSAs are an exceptional savings tool for employees and individuals. But did you know that employers reap the benefits of HSAs as well?

As a recap, the benefits that HSAs provide employees and individuals include:

  • The Triple Tax Advantage: First, all HSA contributions are tax free. Savings can either be deposited pre-tax (meaning the contributions are not included in gross income and therefore not subject to tax) or savings can be deducted from tax returns. Second, HSA funds can be spent tax-free on qualified medical expenses. Third, HSA funds grow tax-free.
  • HSA plans have lower premiums. Though HSA plans have high deductibles, they usually end up saving you more than traditional insurance plans because of their lower premiums. They also tend to have lower annual premium increases.
  • HSA funds roll over from year to year. There is no “use it or lose it” policy. Your money is safely tucked away and stays put even if you change jobs.
  • HSAs can be invested tax-free in mutual funds, stocks, or bonds. MotivHealth Insurance Company even grants access to in-house investment funds if you have a balance of $2,000 or more.

HSAs provide a win-win scenario for employers and employees.

An employer can maximize HSA benefits by setting up a cafeteria plan. A cafeteria plan allows employees to make pre-tax contributions to their HSAs through payroll deferral. This way employees don’t have to take the time to deduct HSA contributions from their tax returns. These plans benefit employers by lowering payroll tax liability and exempting employers from IRS comparability rules.

Additional HSA employer benefits include:

  • Employer HSA contributions are tax-deductible as a business expense.
  • Employer HSA contributions are exempt from FICA taxes.
  • High deductible health plans generally have lower premiums and annual premium increases which benefit employees and employers alike.
  • Employer HSA contributions can lead to improved employee retention.

An employer who has 100 employees on an HSA plan can save more than $50,000 a year in FICA tax savings.

In January 2021, 34% of HSAs received employer contributions, and 60% of all incoming HSA funds could be attributed to employer contributions. So, not only do employer contributions lower the taxes that the company must pay, but they keep potentially unfunded HSAs funded, and they promote financial savviness among their employees.

Sources

“8 Ways HSAs Benefit Both Employers & Employees”
HealthSavings

“HSAs and Their Tax Benefits for Employers”
Bend

“Making the Case for Employer HSA Contributions”
Tom Torre

“Who is FICA and Why is He Getting All My Money?”
InformationStation

“Why Cafeteria Plans Matter for HSAs”
HealthSavings 

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