Group HSA options (and the qualified plans that go with them) reward employers while empowering the employees. Employers enjoy significant per-employee tax reductions, as well as a predictable, fixed– benefits cost. Employees, on the other hand, gain a valuable investment tool… one that simultaneously grows wealth and increases consumer control.
In other words, it’s the rare kind of economic symbiosis that we can get behind.
Here’s what you need to know to get started with a small business HSA.
Why Small Businesses Should Offer Health Savings Accounts
No matter where your business is at in its journey of growth, employee health benefits are a strong investment. In fact, the strength of your company’s benefits package could directly influence your chances of success.
But contrary to popular belief, investing in employee health benefits is not just for the employee. Here are a few ways that an HSA offering can make your company more effective:
- Payroll Tax Deductions. With Health Savings Accounts, neither you nor your employee is required to pay taxes on contributions made to the account. It’s one of the only tax benefits on the planet that helps both employer and employee in equal measure.
- Better Retention & Talent Acquisition. The triple tax advantage of HSAs makes them one of the best investment strategies of the decade. For current and potential employees alike, an HSA option is a good way to build job value. This will lead to a happier, more satisfied workforce that is more likely to stick around long-term.
- HSAs require a High Deductible Health Plan (HDHP)… Which Are Cheaper. The only way you can offer your employees access to an HSA is if they have a qualified HDHP plan. HDHP plans tend to have significantly lower rates. This means that employers can get immediate savings on monthly health benefits costs.
How to Setup a Small Business HSA for Your Employees
Setting up an HSA option is exceedingly easy, and it has the potential to generate big savings for everyone involved. Your Personal Benefits Manager can walk you through the finer details, but here are the basics.
Step One: Offer Your Employees an HSA-Qualified Insurance Plan
Health Savings Accounts are only available to individuals with a qualified high deductible insurance plan. The first step in getting your team set up with HSAs is to make sure that your plan offerings include HSA-qualified options.
There are a lot of high deductible group health plans available, so this should not be difficult. If you are a smaller employer who has health sharing options, many of those plans are HSA qualified as well.
Step Two: Create a Section 125 Plan
The Section 125 Plan is a small but important bit of IRS code when it comes to benefits. Section 125 allows employers to convert taxable benefits (like a paycheck) into non-taxable benefits (like medical expenses). Health plans offered under section 125 are also commonly referred to as “Cafeteria Plans.”
For employers, section 125 plans offer a ton of tax-saving benefits. With per-participant reductions in state and federal unemployment tax and a big reduction in the FICA tax, employers can sometimes save hundreds of dollars per employee every month.
Step Three: Decide How Much the Company Will Contribute to Premiums
Deciding how much of your employees’ premiums you are going to cover isn’t easy. Every business owner would like to offer a generous, competitive benefits package. Unfortunately, this isn’t always possible. But by giving your employees access to an HSA, you can more than compensate.
Step Four: Determine Whether the Company Will Pay Dependent Premiums
Employers are not obligated to pay dependent premiums. However, a many employers see dependent premiums as a big boost to their company benefits package. Chances are, potential employees will see it the same way.
Step Five: Decide How Much the Company Will Contribute to Employee HSAs
As an employer, you have complete discretion of how much you will contribute to an employee’s HSA. In theory, you could pay nothing, or in theory, you could pay the maximum contribution limit. Most employers determine this amount by considering how much they are already paying for employee premiums.
Generally speaking, employers with fewer than 300 employees will contribute around $850 annually for single -HSAs. For family HSAs, it’s more like $1,400. The average contributions trend downward for larger companies (500+ employees). (Source)
In our opinion, the biggest employer advantage for offering an HSA is that its allows for thorough financial forecasting. If your benefits costs are relatively predictable, then it’s much easier to grasp the true costs of growth and development.
Reminder: Some Health Sharing Plans are HSA-Qualified
Because health sharing programs have much lower monthly costs, they are a popular option for small employers. This is because businesses with a small number of employees are not often equipped to offer comprehensive benefits.
One thing that most people don’t know is that many health sharing plans are HSA- qualified. Just like with high deductible insurance plans, HSAs can function as an effective buffer between your employee and their unexpected or emergency medical costs.
Your Home for Small Business HSA Solutions
There has perhaps never been a time in the history of our economy when healthcare has played such a large role in employee satisfaction. This is a trend that we do not see letting up; investing in your company’s benefits package is key. HSAs are a way to do this that also provides the employer with important tax deductions. It’s the literal definition of a win-win, and believe me, that’s rare in this game.
HSA for America is home to a number of highly experienced insurance professionals. We can help your company formulate a healthcare strategy that saves money for everyone involved. Give us a call today or click here to schedule an appointment.
Wiley is President of HSA for America. He believes that consumers should have choice and price transparency, so they can make the best healthcare decisions for their needs. Read more about Wiley on his Bio page.