A group health savings account, or HSA, is a type of health benefit that allows employees to set aside pretax earnings to pay for qualified medical expenses. An HSA usually goes hand-in-hand with a high deductible health plan (HDHP) since it offers a way to offset the higher out of pocket expenses.
A health savings account is similar to a flex-spending account (FSA), but with some important differences. The primary one being that an FSA does not allow for leftover funds in the account to be rolled over into the next year. An HSA, by contrast, does allow for contributions to be used in the future since the plan is technically owned by the individual and not the company offering it, as would be the case with a health reimbursement arrangement (HRA). There is no time restriction on when funds from an HSA may be used toward medical expenses.
Want to know more about group health savings accounts? Kiplinger’s has a good section on frequently asked questions about health savings accounts, including yearly contribution limits.
Employers stand to benefit a number of ways from offering a group HSA. For one, a higher deductible plan means lower premiums, which adds up to savings for employers and employees. An HSA can also be included as part of a company’s employer-sponsored health coverage, which means that corporate taxes do not apply to plans that feature a health savings account.
A high deductible plan couple with an HSA also offers many benefits to employees. Aside from the tax-exempt status of the accounts, they provide employees with a health care option that allows them more control in their health care decisions. Since the deductible is higher with an HSA, the bulk of the savings usually comes from the HSA and not insurance reimbursement, which allows for greater freedom in choosing treatment options. Not only can funds left in an HSA account grow over time and roll over from year to year, but they can also be transferred between employers.
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