Powerful Benefits for Health and Wealth
Employer-sponsored health insurance is a highly valuable benefit to employees. For many Americans, it’s a necessity. But when employees add up their portion of the premiums plus deductibles and coinsurance, the total can put a significant dent in their household budget. Worries about paying for healthcare can lead to stress, which, as we know, is not good for health.
That’s why a growing number of employers are looking for ways to help their associates with financial wellness. As employees’ main source of income, health insurance and retirement plans, employers are best positioned to help. Employees who are financially stable are more productive. They have less stress, are more focused and are less likely to miss work to deal with money issues.
Among the ways employers can help is to offer tax-advantaged healthcare accounts, which help employees offset the burden of these costs. Some of the most popular options include health savings accounts (HSAs), flexible spending accounts (FSAs) and health reimbursement accounts (HRAs). The term “tax-advantaged” refers to any type of account that is either exempt from taxation, tax-deferred, or that offers other types of tax benefits.
These account types differ in their IRS requirements for eligibility, the timeframe in which funds can be used and the maximum amounts that can be contributed annually.
- HSAs can be opened by anyone covered by an eligible high deductible health plan, and account holders keep the money even after they leave the company, so they’re also a popular way to save funds for retirement.
- FSAs and HRAs are employer-sponsored plans, so the features can vary depending on what the employer elects, and the money must be used within a specified timeframe.
One thing they all have in common: Tax savings for the account holder and the employer. The employee’s own contributions to their account(s) are deducted from payroll pre-tax, which reduces their taxable income for that year. The company receives a tax benefit for any contributions it makes to the accounts, in addition to the reduction in the company’s portion of Medicare and Social Security taxes due to employees’ pre-tax contributions to their accounts.
This comparison guide outlines the features in more detail.
And to see some fictional scenarios illustrating the benefits of these accounts for a business owned and operated by our team’s pets, watch this recording of a webinar I hosted for business leaders. Enjoy!
