A health savings account is a tax-exempt account used for medical expenses under a qualified high deductible health plan (HDHP). The account gets funded with employee pre-tax dollars through payroll deduction. Employers can also make contributions to their employees’ HSAs.
The funds are used to pay for deductibles and other out-of-pocket health care costs. HSA participants typically receive a debit card for easy access to their account.
Monies accrued in the account earn interest and roll over from year to year. Excess dollars can be invested in a choice of exchange-traded funds (ETFs) and continue to grow tax-free. Employees also have the option of rolling one HSA into another when changing jobs. This is not required, however, as health savings accounts are portable from job to job and into retirement.
Employees enrolled in an HDHP have the option to participate in a health savings account if offered by their employer. The HSA can be self-funded with pre-tax dollars or co-funded, with the employer making periodic contributions. Employees can also open an HSA on their own through a custodian, such as a brokerage. HSA withdrawals are tax-free when used to pay for qualified health care expenses.
Employees have confidence knowing that they will have the money for individual and family deductibles. Preventive care is most often covered — or partially covered — under an HDHP. HSAs help pay for other costs including:
Health care spending accounts cannot pay for insurance premiums, cosmetic surgery, childcare, vitamins, and similar items. IRS publication 969 outlines all covered and non-covered HSA expenses.
When an employee’s HSA reaches a certain cash balance, they can invest the excess dollars in a choice of investment vehicles. Investments grow tax free. At Highmark, our HSA offers a choice of options for investors of all kinds.
Members can choose from:
Monies accrued in an HSA investment account are 100% owned by the employee. The account offers an additional savings vehicle for the future, supplementing 401(k) and other traditional retirement plans.
Unfortunately, the Plan Sponsor Council of America (PSCA) found that fewer than 20% of HSA participants actually invested their dollars in 2022. Employees across America are leaving money on the table. Our funds offer investments as low as $1, so even the most risk-averse employee can participate.
CNBC reported on IRS increases to health spending account maximum contributions for next year. The inflation-adjusted amounts appear within IRS publication rp-24-25.
These new amounts allow for $4,300 for individual (“self-only”) coverage and $8,550 for families. This maximum includes any employer contribution made during the plan year. Highmark makes it easy for employers to fund HSAs for employees with an HDHP.
Employees over 55 can also contribute an additional catch-up amount of $1,000. The IRS should announce 2025 catch-up limits later this year.
Learn more about how Health Savings Accounts can help your employees better manage their health care costs.
All references to “Highmark” in this communication are references to Highmark Inc., an independent licensee of the Blue Cross Blue Shield Association, and/or to one or more of its affiliated Blue companies.
Talk to your client manager today and we’ll help you find the right health plan for your company.
