Smart Ways to Save
If an employer offers a High Deductible Health Plan (HDHP) that’s Health Savings Account (HSA) eligible, employees have the option of putting money into an HSA on a tax-free basis. Most professionals in the HR field are aware of the advantages an HSA offers employees. Most notable is that money can be withdrawn without a tax consequence if used for eligible medical, dental and vision expenses. The good news is the HSA is owned by the employee and there isn’t a ‘use it or lose it’ penalty, so money will rollover year after year.
What about a Flexible Spending Account (FSA) for further savings potential? Employees can continue to put tax-free dollars into a FSA plan if it’s a limited purpose FSA. This means monies in the FSA plan can only be used for eligible dental and vision expenses. Offering a FSA that’s compatible with an HSA gives employees the option to put aside even more tax-free money. If the FSA plan is set-up to allow a grace period or roll over $500 into the next plan year, it’s best to use your FSA dollars when applicable prior to using your HSA.
How much can employees save? In 2017, the maximum that can be contributed to an individual HSA account is $3,400. The maximum for a FSA is $2,550. Combined for 2017, an employee can reduce their taxable gross by $5,950. Let’s assume an employee has a salary of $50,000 annually with 25% taxation.
If FSA dollars are used first for expenses that are both HSA and FSA eligible, an employee’s HSA account will continue to grow and can be used for any future medical expenses. The bonus – paying less tax!
For more information on smart savings techniques for your employees, contact a member of the ‘A’ Team.
- What’s the Difference Between a FSA and HSA?
- HSA: Consumerism at its Finest
- Don’t Wait for the Cadillac Tax: Offer an HSA
- Using HSAs to Boost Retirement Readiness Webinar Replay
- Professional Services Industry Pages
- Professional Services Blog
- Professional Services Webinar Replays
- Professional Services Library Resources
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