Have you ever worked for a small business and not received healthcare benefits? Working for a small business does not mean that you should not acquire any benefits from your employer. Most employers will offer their employees some type of healthcare benefits, and one thing employers should be looking into is setting up an employee health savings account (HSA). You may be asking yourself what an HSA is. An HSA is a savings account that an employee owns to help save money. HSA accounts cover out-of-pocket medical expenses tax-free. Health savings accounts are beneficial to both the employee and employer.
There are numerous benefits to providing and having a health savings account. These accounts are straightforward to set up, and there are significant tax benefits for both your employer and you. HSA accounts are an excellent opportunity for your employees to gain good healthcare benefits. Some benefits as an employer are lower health benefits costs, employee satisfaction, and lower payroll taxes. Empowering your employees to save on their tax bills and save for retirement is very important and will help your employees in the long run. This will also give them a huge reason to stay with your company long term. As far as for employees, the top benefits of having a small business health savings account are Tax-free savings for retirement costs, lower monthly premiums, and you would have the ability to roll over funds and change contribution levels.
Everything You Should Know About Small Business HSA and Section 125
You may be wondering what Section 125 is and why it is important. If you are hoping to make pre-tax health savings account contributions from the employer and employee, you must have a section 125 plan. There are several options of benefits to choose from. More commonly known as Cafeteria Plans, HSA’s are most commonly included in these plans. One of the best things about section 125 is that any HSA contribution made is not subject to Medicare, unemployment, or even social security taxes. Health Savings Accounts can help you take control of your money and your health. These plans are flexible and easy to navigate and set up. Once an HSA account is set up, you can begin to deposit tax-deductible funds into your savings account to cover medical costs.
Common FAQ’s about Health Savings Accounts
Let’s dive into some of the most frequently asked questions about small business HSA.
Can I Have An HSA If I’m Self-employed?
The short answer is yes. However, there are different variables you must think of if you are self-employed. You can open and contribute to an HSA if you enroll in an HSA-qualified plan. If you are self-employed, you should look into high deductible health plans which are HSA qualified. If you are self-employed and already enrolled in Medicaid or Medicare, you will not be eligible for a health savings account. Also, you can not be claimed as a dependent on a person’s tax return. These are just a few things to consider if you want to open an HSA account but are self-employed.
Who Contributes To An Employee HSA?
This is where health savings accounts are outstanding for employees. Contributions are made by both the employee and employer. As an employer, they will choose the contribution limit and talk with the employee about different options about contributing each month. In some cases, your employer can even offer to fund the annual limit.
What Is The HSA Contribution Limit In 2021?
In 2021 we have seen an increase in the annual limit from previous years. For 2021, HSA contributions are $7,200 for families and $3,600 for any one individual.
Are HSA’s and FSA’s The Same Thing?
No! Health savings accounts and flexible saving accounts are indeed different. Though they are both types of savings accounts, the main difference is that HSA’s are owned by the employees, and the employer typically owns an FSA.
Benefits of Contributing To A Small Business HSA
We know that as the cost of insurance premiums continues to rise in our society, HSA’s will continue to be an effective way for your employees to stay protected from unexpected expenses.
If you’re not sold already, here are a few benefits that come when you contribute to an employee HSA:
- There are tax advantages to you, the employer. Any contribution that you make is eligible for a federal tax deduction. HSAs can even save your company a ton of money on payroll taxes and FICA taxes instead of a salary increase.
- There is no minimum amount you have to contribute. Unlike other health insurance companies, there is no minimum requirement for contributing. That makes employee HSAs a possibility even for small businesses, who have the option of starting small and increasing their contribution over time.
- Even the employee can benefit from tax advantages. For example, HSAs make it possible to save pre-tax dollars for health care expenses. This is a valuable part of any retirement portfolio, which translates to an attractive workplace benefit.
- Employees take their funds with them. HSAs are owned by your employees so that even if they change employers, they can take it with them to their next job.
Healthcare can be costly and confusing because of how many plans, requirements, and costs there are. Many people overthink and overpay because they do not know of any other option! Health savings accounts make your life as an employee much better because of how affordable and easy to set up they are. Get started now and get a free quote today.