Why Offer an HSA?
Healthcare is a key benefit for attracting top talent. It’s also one of the most expensive. Paired with an HDHP, HSAs can result in significant savings for employers.
HDHPs typically come with lower insurance premiums than traditional insurance plans. Many employers contribute those premium savings to employee HSAs. Employees use the HSA to pay for deductibles, co-pays, coinsurance, and other eligible expenses now or save the funds for retirement.
With BPAS Roadways HSA administration, employers
save money. Employees have more spending money per paycheck, save more money for retirement, and make money by investing.
What is an HSA?
Health Savings Accounts (HSA) are tax-advantaged medical savings accounts available to employees who are enrolled in an HSA-Qualified HDHP. Both employees and employers can make tax-free contributions to an employee’s HSA account. Because the premiums are significantly lower than a traditional comprehensive healthcare plan, employers and employees will normally use some of the cost savings they experience to contribute to the HSA.
Each year, the IRS sets specific limits on what qualifies as an HSA-eligible HDHP, as well as the contribution limits going into the accounts. Current IRS limits are:
| 2024 |
Single |
Family |
| Minimum Annual Deductible |
$1,600 |
$3,200 |
| Out of Pocket Maximum |
$8,060 |
$16,100 |
| HSA Contribution Limit |
$4,150 |
$8,300 |
| Additional contribution if age 55+ |
$1,000 |
$1,000 |
| 2025 |
Single |
Family |
| Minimum Annual Deductible |
$1,650 |
$3,300 |
| Out of Pocket Maximum |
$8,300 |
$16,600 |
| HSA Contribution Limit |
$4,300 |
$8,550 |
| Additional contribution if age 55+ |
$1,000 |
$1,000 |
Similar to a 401(k) Plan, participants have a set of mutual funds into which they can direct investments. Through the BPAS true open-architecture investment platform, we offer high quality investment menus across the full range of asset classes. Employees benefit from first-dollar investment access in their account, a stable value fund, and a range of other funds with different investment objectives and risk profiles.
Tax Advantages
There are three key tax advantages to HSAs, which can provide for significant tax savings to both employers and participants:
- Contributions to the HSA are generally not subject to federal income tax.
- Investment earnings in an HSA account typically grow tax-free.
- Distributions from an HSA are tax-free—as long as the dollars are used to pay for a qualified medical expense.
Contributions employees elect to make into their HSA also provide employers with a tax benefit by reducing their FICA/payroll tax liability. Besides the lower premium costs, this tax savings is another reason employers should encourage employees to participate in an HSA and maximize employee engagement in the plan.
The IRS Code Section 213(d) defines qualified medical expenses. These expenses generally include deductibles, coinsurance, copays, prescription drugs, dental and vision care, etc. HSA participants will receive a free debit card offering them a fast and easy way to pay for qualified expenses. They can also file claims for reimbursement through our online participant website portal or the BPASClaims App.
Similar to a 401(k) Plan, account balances in an HSA account roll over from plan year to plan year. There is no use-it-or-lose-it rule. HSA accounts are owned by the employee accountholder, so they’re portable and remain with the employee during employment and throughout retirement.
Although HSA accounts and 401(k) Plans do have similarities, we believe the best strategy is to offer these plans in tandem to help your employees succeed in effectively saving for their future. Unfortunately, many Americans are not saving enough for retirement and face many financial uncertainties in their future—especially when it comes to retirement healthcare costs. The HSA serves a dual purpose: to let employees save for both current and future healthcare costs, while preserving 401(k) balances for other non-medical-related expenses during retirement years. And the tax-free use of these funds for healthcare costs in retirement is a major advantage compared to the “tax-deferred” treatment of most DC-Plan distributions (excluding Roth).
