A health savings account (HSA) is that can be paired with a qualified high-deductible health plan and offers unique advantages that other types of benefit accounts don’t offer. The unmatched flexibility of HSAs allows employees to use their funds . Employees can spend their HSA dollars on eligible health expenses, save for future unexpected expenses, or invest their funds to support their long-term retirement goals. HSAs support participants at whatever stage of life they’re in.

Spend

HSAs can offer short-term, immediate financial security by providing participants tax-free funds to pay for unexpected or planned eligible health expenses.

A 2021 Bankrate study found that only 39% of Americans could afford a $1,000 unexpected cost from their savings, for something like an emergency room visit. The amount of people who are able to cover a large, unexpected expense without borrowing is even lower for younger individuals. HSAs can play a key role in helping employees weather these unexpected expenses.

HSAs can also be used to pay for planned or known reoccurring expenses. Funds from an employee’s paycheck enter the HSA tax-free and come out tax-free as they make eligible purchases. This provides an immediate tax savings and reduces the need to spend dollars form other after-tax sources.

Save

Not only are HSAs a great vehicle for saving on eligible medical expenses, it can be used to save for future health expenses. Utilizing an HSA as a means for planning for the future adds another layer of tax-savings beyond spending on current expenses – allowing funds to grow tax-free and saving $0.30 on the dollar*.

*These tax examples are broad approximations of tax liability. Your specific savings depend on your tax bracket. You should consult a tax advisor for help with your own situation. Current IRS tax laws control all HSA matters and are subject to change.

Younger workers or individuals that are new to a high deductible health plan may not have the time or funds to allow their HSA to mature yet, so opening the account and saving what they can is a big first step towards making the most of their accounts.

Invest

Participants can take triple tax savings even further through the unique investment opportunity that many HSAs offer. More than any other benefit account, an HSA offers immense lifelong benefits that encourage long-term financial growth. Choosing to invest HSA funds, once a minimum balance is met, allows tax-free growth that can be an extremely effective way to help with financial planning and preparation for retirement.

Currently, 35% of all HSA funds are invested, and this amount is projected to grow as educational efforts improve and employees are encouraged to invest to fully optimize their account benefits. Account holders who have HSA funds invested have a balance 7.3 times larger on average than accounts that do not invest. This gap shows how effective of a tool HSAs can be to help support long-term financial wellbeing.

With proper education and positioning, employers can encourage their employees to maximize their HSA as both a short-term savings vehicle for eligible health expenses and a long-term retirement planning benefit.

Attend our Webinar

Are you interested in learning more about HSAs and who should consider adding one to their benefits offering? On August 11, EBC’s Vice President of Business Development Brian Connelly will be taking an in depth look at HSAs and how they fit into today’s benefits landscape.

Don’t miss out on this webinar, register today: https://www.ebcflex.com/webinars/