Daniel Stewart

What to Know About HSA Employer Contributions

Health savings account (HSA) contributions from employers have become an expected perk for employees in 2022, but understanding how to manage an employer HSA plan can be tricky. This is especially true for new employers or employers who have decided to begin offering HSA benefits for the first time.

In a nutshell, an employer HSA plan typically works alongside traditional health insurance offerings and allows employees to contribute tax-free money toward a designated savings account. The funds from this account are only able to be used for healthcare spending. Many employers choose to contribute to these accounts as an added bonus. Part of the reason for doing this is that employers may be able to save on group insurance premiums by offering an HSA plan.

Your Obligations as an Employer

If you choose to offer your employees access to an HSA plan, there are certain obligations you must adhere to according to the Internal Revenue Service (IRS). You must offer your employees one taxable option and one non-taxable option. The taxable option is one that is considered to be part of the employee's gross income while the non-taxed option is excluded from gross income figures by the IRS.

How Are Contributions Made?

Employers are able to break up contributions to employee accounts. An employer can contribute one lump sum at the beginning of the year or break contributions up into smaller pieces that get entered into accounts each pay period. It is also possible to break contributions into semi-annual events or quarterly events.

Which direction you choose is up to you, but it may be a good idea to gauge your employees' interest before making a decision. Because healthcare costs tend to come in high amounts a few times a year, having the money available in an HSA at the beginning of the year might work out better for the employee.

On the other hand, taking this approach requires more budgeting and capital on the part of employers, meaning it may not work out in the long run. You're encouraged to work with your accounting team to discuss the needs of your business and balance these accordingly alongside employee wellness and quality-of-life standards.

Author Resource:-

Daniel Stewart has been helping people with their money management and personal finance with over 15 years' experience in business finance. You can find his thoughts at HSA investment advice blog.