Health Savings Account
A Health Savings (HSA) is a benefit that is frequently offered with the Employer’s qualified High Deductible Health Plan. An HSA is a tax-advantaged employee-owned account that may be used to pay for qualified medical, dental, vision, and pharmacy expenses for the participant, spouse, and dependents.
Employee Owned
Unlike many other types of pre-tax plans, the Health Savings Account is owned by the participant and can be taken with them after employment terminates. The funds in the HSA can be used to pay for qualified medical, dental, vision, and pharmacy expenses throughout the participant’s lifetime. After a dollar threshold has been met, funds may even be invested!
Starting at age 65, funds may be withdrawn for any reason and are taxed as income. Expenditures for qualified expenses are tax-free.
Eligibility
Employers
- Employers can save on premiums by switching to a high deductible health plan (with an HSA) from a low deductible plan.
- Since employee contributions reduce taxable income, the Employer’s FICA/FUTA is reduced.
Participants
Only employees who are enrolled in the qualified High Deductible Health Plan, are not covered by any other insurance, and are not currently enrolled in a Health FSA may enroll in an HSA. HSA eligibility is evaluated monthly and is determined by eligibility on the first day of the month.
How an FSA Saves
Employers
- Since employee contributions reduce taxable income, the Employer’s FICA/FUTA is reduced.
Participants
- Contributions are pre-tax. This can save the participant 25%-40% on eligible expenses.
- An HSA can help lower the total cost of a high deductible health plan. Participants also save on premiums compared to a lower deductible health plan.
Who Can Contribute
Both participants and Employers can contribute to an HSA.
How it Works
For Employers
The Employer hosts Open Enrollment with employees and enrolls those who want to sign up for the HSA.
The Employer deducts pre-tax contributions from each participant’s paycheck. These contributions are held in participant-owned bank accounts administered by EMPOWER.
EMPOWER administers the Plan. Reimbursements and expenses are deducted from each participant-owned bank account.
For Participants
Employees enroll in the HSA and choose their annual elections.
The Employer deducts pre-tax contributions from each participant’s paycheck. These funds are sent to EMPOWER to deposit in the participant-owned HSA accounts.
Participants may transfer funds from their old HSAs to their EMPOWER HSA.
Participants may invest their HSA funds after the balance has reached a threshold.
Participants pay for eligible expenses with the EMPOWER Visa Debit Card or seek reimbursement from EMPOWER.
Want the Latest Contribution Limits and Guidelines?
EMPOWER’s Benefits Solutions Guide takes the guesswork out of benefits by providing a comprehensive synopsis of each plan type, as well as comparisons and sample scenarios
