2. As an employer, why should I consider offering my employees the HSA with a High Deductible Health Plan (HDHP)?
HSA-eligible health plans can reduce healthcare costs for U.S. businesses dramatically; some studies cite a 20% to 30% lower cost than average insurance premiums (per an America’s Health Insurance Plans (AHIP) article, “HSAs and Account-Based Health Plans,” June 2006).
Sharing a portion of the insurance premium savings with your employees through a recurring employer contribution to their HSAs can increase the likelihood that a higher percentage of your employees will adopt your company’s HDHP plan. This practice allows the employer to recognize significant cost savings while reducing the out-of-pocket healthcare cost risk for their employees.
3. Are there any other benefits for the employer in offering the HSA
For small business owners, HSAs can help reduce a business’s payroll taxes along with reducing administrative time and costs since employees self-administer their HSA.
4. Who can provide the HSA to my employees once an HDHP has been selected?
Insured banks are automatically qualified to handle HSAs. Any bank that currently meets the IRS standards for being a trustee or custodian for an IRA or Archer Medical Savings Account (MSA) can be a HSA trustee or custodian. The law also allows insurance companies to be HSA trustees or custodians.
5. As an employer, do I own my employees’ HSAs? Can I control how they spend the money in them?
No, you do not own your employees’ HSAs. The employee fully owns the contributions to the account as soon as they are deposited, just as they own a personal checking or savings account to which you would deposit their compensation.
6. How much do I have to contribute to my employees’ HSAs, as an employer?
You may contribute as much or as little as you want while staying below the limit on annual contributions of $3,250 for employees with self-only coverage or $6,450 for employees with family coverage in 2013.
7. Do HSA contributions have to be made in equal amounts each month?
No, you can contribute in a lump sum or in any amounts or frequency you wish. However, keep in mind that the funds belong to the employees after they are deposited.
8. As an employer, do I have to contribute the same amount to every employee’s HSA?
Employer contributions must be “comparable,” that is, they must be in the same dollar amount or same percentage of the employee’s deductible for all employees in the same “class.” You can vary the level of contributions for “full-time” versus “part-time” employees and employees with “self-only coverage" versus “family coverage.” You do not need to consider employees who do not have HDHP coverage as they are not eligible for HSA contributions.
9. Our company offers benefits through a Section 125 plan; do contributions have to be comparable under these plans as well?
Section 125 plans (also know as “salary reduction” or “cafeteria” plans) must meet a different set of rules. Under these plans, contributions (both from employer and/or employee) must meet “non-discrimination” rules. These rules require the employer to ensure that contributions do not favor higher compensated employees.
10. Our company wants to offer “matching” contributions, can we do that?
Yes, but your company can only offer “matching” contributions through a Section 125 plan. Remember that the non-discrimination rules still apply.
11. I do not offer health insurance, but some of my employees have opened HSAs and I would like to help them out, what can I do?
Your company can make pre-tax contributions to your employees’ HSAs as long as you do so for all eligible employees. However, the comparability rules apply (referred to in question 8). If you have a Section 125 plan, then the non-discrimination rules apply (referred to in question 9).
12. How are contributions treated for owners and shareholders of Subchapter S corporations?
Owners and officers with greater than 2% of all shares of a Subchapter S corporation cannot make pre-tax contributions to their HSAs through the company by salary reduction. In addition, any contributions made to their HSAs by the corporation are taxable as income. However, they can make their own personal contributions to their HSAs and take the “above-the-line” deduction on their personal income taxes.
13. How are contributions treated for partners in a partnership or limited liability company (LLC)?
Partners in a partnership or LLC cannot make pre-tax contributions to their HSAs through the partnership by salary reduction. However, they can make their own personal contributions to their HSAs and take the “above-the-line” deduction on their personal income taxes.
14. May a self-employed person contribute to a HSA on a pre-tax basis?
No. Self-employed persons may not contribute to a HSA on a pre-tax basis and may not take the amount of their HSA contribution as a deduction of SECA purposes. However, they may contribute to a HSA with after-tax dollars and take the “above-the-line” deduction.