Healthcare Savings Accounts (HSA)
Employees participating in a qualified HDHP can open an HSA account. Contributions to an HSA are not subject to federal or state income tax, they rollover year-to-year, and can have interest bearing accounts. HSA funds can be withdrawn tax-free to pay for eligible medical expenses and can be funded by the employee, by the employer, or both the employee and employer.
Benefits for Employers
- Employers reduce FICA taxes
- Employer contributions to employee HSAs are tax-deductible
Benefits for Employees
Employees not only have access to funds to pay for current and future healthcare expenses, but also qualify for 3 tax advantages:
- Contributions are pre-tax
- Withdrawals for qualified medical expenses are tax-free
- Interest earned on investment fund options are tax-free