Frequently Asked Questions

How do HSAs work with group insurance plans?

A Health Savings Account (HSA) is a way for insurance plan members to prudently prepare for future healthcare expenditures in a tax-advantaged way. HSAs promise to change the way both companies and employees protect themselves from the growing costs of healthcare. It's essentially a tax-free "nest egg" that an employee can contribute to while he or she is covered by a high-deductible insurance policy. It's typical for someone to deposit an amount equal to their (high) deductible into this account every year. Many people aren't aware that Health Savings Accounts (HSAs) can actually help you save for retirement kind of act like a form of "backup 401(k)". Before retirement, you're required to use the money in an HSA for medical expenses only otherwise, you pay a penalty. But after retirement, you're allowed to withdraw HSA money for any purpose you want, without penalty. Since you contribute to an HSA with pre-tax dollars and the money inside the HSAs compounds tax-free it makes for a great retirement savings vehicle. HSAs are regulated under the Employee Retirement Income Security Act and are essentially regarded by the government as a retirement plan. The tradeoff is that in order for them to open an HSA, your employees have to hold a high-deductible insurance plan. If you do select a group insurance plan that is HSA-compatible, it means you will be able to provide your employees with viable health coverage and an HSA that they will then be able to keep and grow even after they have left your company, not unlike a 401(k) account.

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