A Quick & Painless Overview of HSAs So You Can Save Money
Why Care About a Health Savings Account (HSA)?
A lot of small businesses don't realize how many benefits they can get from HSAs - including lower insurance premiums and many tax advantages.
What's an HSA?
An HSA is a savings account that you pair with a qualified high deductible health insurance plan.
More and more employers are offering this kind of consumer-directed health plan (CDHP) to their employees as a way to lower costs and still maintain quality benefits.
With the HSA, however, you have triple the tax advantages by way of contributions, investment earnings, and amounts distributed for qualified medical expenses. These are all exempt from federal income tax, FICA tax and most state income taxes.
Quick Highlights of an HSA
👉 HSAs are owned by the employee and they're portable from one employer to the next - or even into retirement. Financial contributions can be made by both the employee and the employer, and funds can be rolled over.
👉 HSAs (for 2018) are currently capped at $3,450 for individuals, and $6,900 for families, but you can view all of the updated amounts at IRS.gov as they change year to year.
👉 You are able to spend HSA money on qualified medical care expenses such as co-pays, contact lenses, crutches, sunblock, and much more.
Your insurance broker can help you choose the best plan option for your business and within your budget.
If you're 55 or older (in 2018), you can contribute an additional $1,000 or total of $4,450 to an HSA if you're single and $7,900 if you're covering a family.
You can view our colleague's latest YouTube video to get updated contribution limits for 2018, as well as an overview of the other types of accounts referenced above.
As a courtesy to our readers, we also have a downloadable Word doc with all the Q & As.
UPDATED May 2018:
At one point, the IRS reversed themselves on the 2018 contribution limit - it is now back to $6,900 for families. Which is why it's a good reminder to always check the IRS.gov website and check in with your CPA on any changes.