As of 2010, the industry estimates that more than $10 billion in employee contributions had made their way into Health Savings Accounts, or HSAs. Started in 2003, this type of health benefit was designed to assist participants in saving up funds that will be used to cover health expenses of themselves and their dependents.
HSAs Gaining Huge Following
The rise in popularity of these plans comes as no surprise. They are available to any employee who participates in a HDHP, or High Deductible Health Plan, which many employers offer to keep benefit costs in check. Employees puts some amount into it and this money gains interest tax-free. Unlike FSAs (Flexible Spending Accounts), there is no “use it or lose it” rule that requires the employee to deplete the account within a certain time frame. And, if the employee needs to change jobs, this account is portable and remains available to him. Should the employee die, the assets in the HSA can be used by his spouse, or can pass to his other heirs if they are not married. There are a wide variety of IRS-defined “eligible expenditures” that these accounts can be used to fund.
HSA and Section 125 Plan – A Sure Combination for More Savings
For more savings, the employer can offer the HSA through a Section 125 POP. This is also a requirement if contributions to the HSA are to be made via payroll deduction. For those who are not aware yet, a Section 125 plan allows employees to contribute to health plans on a tax-free basis, reducing both their and the employer’s payroll taxes. A health savings account ran under a Cafeteria or POP Plan therefore increases the employee’s contribution, and with the taxable income reduced, the employer also realizes savings as his share of FICA, Medicare, and FUTA taxes are also lowered.
How to Offer an HSA
Companies who have yet to set up a Health Savings Account under a Section 125 POP Plan and are having doubts because the process could be complicated, have nothing to worry about because the expert administration companies that make it easy to add on this important component to your plan. Hiring to guide you through the process of making the mandatory changes to your plan documents to incorporate the HSA is both easy and inexpensive. Companies who specialize in these services can offer the necessary plan documents within minutes so your employees’ HSAs can be set up in no time.
Changes for 2011
While more employers and workers are realizing the benefits that a Health Savings Account brings, the plan could be modified and amended from time to time. For instance, plan administrators have recently removed over-the-counter medicines from the list of qualified expenses covered. Your plan document needs to be updated to contain specific HSA language, or should be updated to reflect the current law.
Maximize the great benefits that a Section 125 POP can provide you and your employees! Drop by at taxfreepremiums.com and discover a secure and affordable way of getting your HSA and POP plan document ready and updated all the time.