How To Use Health Savings Accounts for Small Business

Businesses Can Use Health Savings Accounts To Save

Millions of businesses around the nation provide generous benefits to their employees. Health insurance is one of the most commonly expected benefits that is provided by the majority of employers, including small business owners, medium-sized business owners, and large corporations. Many insurance programs provide incentives for businesses to offer group healthcare coverage to employees in the form of lower group rates than the rates that are offered for individual healthcare plans. For that reason, it is commonplace for employees to expect to get more affordable healthcare coverage through an employer than they might get on their own.

However, even while healthcare coverage programs may be priced lower when offered through an employer’s plan than through an individual plan, many businesses and their employees can achieve greater savings and long-term financial benefits by opting for Health Savings Account plans in lieu of costlier group health insurance plans provided by an employer. When employees enroll in Health Savings Account plans, they not only ensure that they have complete control, but they also have a vehicle to reduce their annual income tax burdens while growing their wealth.

How Health Savings Accounts Help Businesses

Health Savings Accounts not only help employees to reduce their taxes and grow their wealth, but they also provide a slew of social and financial advantages to businesses. One of the most outstanding benefits to businesses is that when employees have control over their own healthcare plans, businesses do not have the burden of managing the healthcare coverage for all of their employees. This not only reduces paperwork for businesses, but it also increases employee privacy, reduces overhead expenses for businesses who want to provide benefits to their employees, and enables employees to control their own healthcare programs.

How Employees Use their Health Savings Accounts

In order for employees to receive the full benefits from their Health Savings Accounts, they need to take a few steps that employers may wish to walk them through. First, employees need to enroll in a qualifying high deductible insurance plan. Employers may recommend appropriate plans for their employees based on their region.

Next, employees need to establish their Health Savings Accounts through a savings institution, such as a bank. To establish the initial savings account, employees will need to make a small deposit into the account. The funds that employees deposit into their Health Savings Accounts are reduced from their annual income tax requirement, which means that for every dollar they deposit into their Health Savings Accounts, that dollar is removed from their tax burden.

Maximum Tax Benefits for Health Savings Accounts

In order to receive the maximum possible tax benefit provided by a Health Savings Accounts, it is important for Health Savings Account participants to contribute as much money as possible towards their Health Savings Accounts each year. However, there is a cap on the contribution amount that participants are able to make.

For 2009, an individual with self-only coverage has an annual cap of $3,000. For family-coverage, the annual contribution limit is $5,950 for 2009. If individuals are over the age of 55, they are able to make an additional “catch-up” contribution of $1,000 on top of the maximum annual cap for their qualifying plans.

By investing Health Savings Account funds into high interest-yielding investments, participants can realize tax-deferred or tax-free growth on those funds.

Health Savings Account funds are not taxed if they are used to pay for qualifying medical expenses. These funds may also be withdrawn at any time for any reason. However, if the funds are withdrawn for reasons other than to pay for qualifying medical expenses, participants may be taxed on the amount of money withdrawn.

Maximum Out-of-Pocket Expenses

In addition to a maximum contribution limit that Health Savings Account participants can make, there is also a maximum out-of-pocket expense amount that participants will have to pay. Health Savings Account participants need to be enrolled in a qualifying high-deductible health insurance program that goes hand-in-hand with their Health Savings Accounts.

Even with the high-deductible insurance account in place, the maximum out-of-pocket expenses for 2009 were $5,800 for an individual plan and $11,600 for a family-coverage plan. The minimum out-of-pocket expenses for these insurance plans for 2009 are $1,150 for individual coverage and $2,300 for family coverage.

Many businesses can save a lot of money by switching their employee health insurance benefits to Health Savings Account options. In addition to the savings for businesses, employees will be able to reduce their taxes and grow their wealth.

About the Author: By Wiley Long – President, HSA for America – The nation’s leading independent health insurance agency specializing in individual and family HSA plans that works with a Health Savings Account.

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