Health Savings Accounts (HSA’s) were created in 2003 in an attempt to rein in skyrocketing health care expenses.  New High Deductible Health Plans were created to make people more aware of their health care expenses and with the higher deductible motivate participants to avoid unnecessary physician visits and treatments, select generic over brand name drugs and utilize lower cost service providers.  To entice people to enroll in these HDHP’s, Health Savings Accounts were created that offered triple tax savings.  First, contributions into the HSA would be pre-tax through payroll or tax deductible on tax returns.  Second, all interest earned on the accounts would be tax deferred.  Third, all amount withdrawn to pay for eligible healthcare costs would be tax free.  With significantly lower premiums, the savings employees realized on their weekly payroll deductions could be reallocated into the HSA’s to cover the high deductible.

While initial adoption was slow, more and more employers are selecting HDHP’s as a way to lower their benefits expense.  Accordingly, the number of HSA’s has also increased to more than 25 million at the end of 2018.  Still, this number is significantly lower than the number of employees enrolled in the HDHP’s.  Why?  Because many of these employees do not properly understand HSA’s, how they work and all of their benefits.  Often they are discussed only in passing as part of the open enrollment meetings and never discussed again until the following year’s meeting.  As a result, 40% of participants in HDHP’s never open an HSA.

82% of workers feel that medical costs are their largest challenge, both today and also in retirement.  HSA’s are still an underutilized benefit that can greatly assist employees to meet these expenses and be less stressed.   However, more education is needed so that employees properly understand how they work and the benefits they provide in both the short and long term.  This means not just a brief notation at open enrollment meeting, but instead detailed explanations and periodic updates during the year.  The employer also needs to shop around to find financial institutions that will provide the Health Savings Accounts with no service or transaction fees and options for investing surplus funds for the longer term.

Or they can just call Total Team Solutions and have it done for them quickly and easily.  For more than 30 years, Total Team Solutions has been assisting small businesses in New York and Connecticut with managing their benefit plan to provide the best coverage at the lowest cost.  We also keep our clients up to date on new developments and regulations with regard to healthcare plans, HSA’s, retirement plans, payroll and related tax credits that are available.  For more information on how Total Team Solutions can save you time and money and help make your company’s human resources run smoother, contact John Morlock at 800-836-9678, ext. 5, or email him at jmorlock@ttspro.com.