Health savings accounts (HSAs) have become integral to many employers’ benefits packages, as they offer employees a valuable tool for managing health care expenses while enjoying tax advantages. However, administering HSAs is more than just facilitating contributions. It also requires understanding and involves addressing mistakes with distributions that employees may encounter.
This article explores the fundamentals of HSAs and common distribution mistakes and discusses how employers like you can support their employees in correcting these errors.
HSAs are tax-advantaged savings accounts available to individuals enrolled in high deductible health plans (or HDHPs). They allow employees to set aside pre-tax dollars to cover qualified medical expenses, providing a triple tax advantage: contributions are tax-deductible, earnings grow tax-free and withdrawals for qualified medical expenses are tax-free. Contributions to HSAs can come from both employees and employers. Lastly, HSAs are subject to individual and family coverage annual contribution limits determined by the IRS.
Despite employees’ best intentions, mistakes in HSA distributions can occur. Some common errors include:
As an employer, there are several ways you can support employees in correcting mistaken HSA distributions:
HSAs provide employees with a valuable opportunity to save for health care expenses and offer significant tax benefits. As an employer, it’s essential to support employees in understanding and managing their HSAs effectively.
By providing education, resources and guidance on correcting mistaken distributions, employers can help their workers make the most of their HSA benefits while minimizing potential pitfalls. Together, employers and employees can navigate the complexities of HSAs and achieve greater financial wellness.
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