15 Feb A Small Business Health Savings Account for your Company is Good Business
In a competitive job market, benefits can help small businesses hire quality employees. A Health Savings Account (HSA) can be used to pay for qualified medical expenses without being subject to taxes. If your employees have high-deductible health insurance, contributing to a small business HSA may be an easy-access benefit to offer.
Related: Introduction to Small Business Health Insurance
Does My Business Qualify to Offer HSA?
Anybody enrolled in a High Deductible Health Plan (HDHP) or an Individual Health plan qualifies for a HSA. Some Minimum Essential Coverage (MEC) insurance plans are also eligible. For 2023, the IRS defined HDHPs as health insurance plans with a copay of $3,850 for individuals and $7,750 for families. If you’re also shopping for small business health insurance, you will notice HSA eligible plans will often be flagged or noted, as “HSA-Qualified” in listings.
No Minimum Contribution for Small Business HSA
Another perk of HSAs for small business owners is that there is no minimum required contribution to participate. An employer can start with a small amount and then grow and alter when—and if—their company changes. Business owners choose how much they contribute, up to the maximum allowed by the IRS ($3400 for an individual from both employer and an individual in 2023), or HSAs can be funded entirely from an employee’s gross pay. Many businesses will match an employee’s contribution up to a specified percentage of pay.
Small Business HSA Tax Advantages
All contributions to Health Savings Accounts are tax deductible and can save companies money on payroll taxes. Withdrawals for qualified healthcare expenses are tax-free for account holders, and similarly, any dividend gains or earned interest are also tax-deferred. All HSA contributions, by employer or employee, are tax-deductible.
Employee Benefits from HSA
An HSA is entirely owned by the account holder, so if an employee leaves or is let go their account, and the money within, is theirs alone. It can be withdrawn or spent tax-free on qualified medical expenses. Employees’ contributions are either a pre-tax deduction from their paycheck or, if it is not taken out pre-tax, then the tax benefit can be realized at tax time. It’s known as tax-advantaged savings, and your employees should be so lucky.
Benefits Administration: PayrollCentric Can Help.
PayrollCentric makes benefit administration and open enrollment easy for administrators and employees alike with our online enrollment platform. Do your employees have complex benefits questions? PayrollCentric can help. Call us at 310-258-9703 or contact us online.