Both employers and employees at companies of all sizes have realized cost savings from pairing a High Deductible Health Plan (HDHP) with a tax-advantaged Health Savings Account (HSA). Plan Sponsor noted in February 2018, “Benefiting from workers’ and employers’ slowly increasing understanding of the “triple tax advantage” of HSAs, the accounts collectively grew to an estimated $45.2 billion in assets in over 22 million accounts at the end of 2017.”
What should I look for in an HSA administrator?
- HSAs were first made available beginning in 2004. Look for an experienced financial institution that has been in the forefront of HSA administration.
- You’re in the business of running your business. Choose an administrator that provides easy and simple methods for you, the employer, to manage enrollment and contribution processes without adding to your administrative burden.
- Employees who establish HSAs usually have distinct needs and typically fall into three categories; spenders, savers and investors. Choose an HSA administrator that offers an FDIC-insured interest bearing cash account along with an integrated HSA investment account option to meet the needs of all your employees.
- Accessing account funds in convenient, familiar ways is important. Pick an HSA administrator that offers debit cards as part of their standard offering. Look for other convenient and digital ways to make payments that add value to the employee experience.
- Today’s healthcare consumer is on the go, all the time. Seek out HSA administrators that offer a robust mobile application.
How Do I Manage My HSA Program
The employer experience should provide easy-to-use options for enrolling employees and making payroll and/or employer contributions right from your desktop. An integrated, robust platform is key. The portal should provide:
- An automated enrollment tool to upload demographic/ enrollment files containing employee enrollment information.
- The ability to add a single employee or a series of employees to your program using a simple, intuitive web page.
- A dedicated specialist to help with implementation and maintenance.
What Type of Tools Do My Employees Need to Manage Their HSAs?
Look for an administrator with a state-of-the art website designed specifically for managing healthcare spending. It should enable:
- Complete, intuitive account management, including robust notification options
- Self-service for distribution options, including Online Bill Pay and the ability to electronically reimburse oneself to a personal bank account
- An online tool to enable employees to consolidate, track and categorize expenses online and budget for annual healthcare expenses
- An integrated mobile app that allows employees to manage their expenses on the go
- A debit card that can be used to pay for qualified medical expenses
- A dedicated and experienced service team available toll-free with extended hours
Should My Employees Have Investment Options to Grow Their Accounts?
Employees should have the option to direct a portion of their account balance into a selection of no-load or load-waived mutual funds2 that allows “HSA Savers or Investors” to put aside funds for retirement spending needs or future medical expenses.
Should HSA Administrators Offer Mobile Capabilities for my Employees?
An HSA program administrator should offer mobile capabilities so that your employees can manage their health expenses while on the go. They should be able to view transaction details and account balance information, initiate account transactions and use their mobile device to track expenses, upload and store receipts for recordkeeping purposes and interact with their account.
As the Employer, Can I Contribute to an Employee's HSA?
Yes, both employees and employers can contribute to your employees’ HSAs. Plus, you may save on payroll and FICA taxes through tax deductible contributions. Keep in mind, total combined employer and employee contributions to an employee’s HSA cannot exceed the annual limit set by the Internal Revenue Service (IRS).
As an Employer, Do I Have to Contribute the Same Amount to Every Employee's HSA?
No. If you elect to contribute to your employees’ HSAs, you must make “comparable” contributions to all participating employees’ HSAs in the same dollar amount or same percentage of the employee’s deductible — for all employees in the same “class.” Employers may vary the contribution level for full-time versus part-time employees, and employees with individual coverage versus family coverage.
How are HSA Contributions Treated for Owners/Shareholders of S Corporations, Partners in a Partnership or Limited Liability Company (LLC), or Self-Employed Individuals?
There are unique circumstances for these specific ownership/ employment situations. Please consult your tax advisor or the IRS.
As an Employer, Can I Control How My Employees Spend Their HSA Funds?3
No. HSAs are individually owned, and employees have full ownership and control of contributions to their account as soon as the funds are deposited (in the same manner that their wages are deposited to a personal checking or savings account). Employees are responsible for ensuring any account funds are spent on qualified expenses according to IRS guidelines.
Who is Responsible for Paying Any Service Fees That May Be Incurred on the HSA?
Employers have the option to pay any monthly administrative fee on behalf of their employees or choose to have any application monthly administrative fee charged against the employees’ account balance.
What Happens to an HSA if an Employee Terminates From the Company?
HSAs are individually owned accounts and are portable; therefore, former employees keep their accounts, and any funds in the HSA can be used to pay for qualified medical expenses.
I Have an Existing HSA Program with Another Administrator. How Can I Transfer My Programs, And Can My Employees Transfer Their HSAs?
Your chosen administrator should offer experience in transferring existing HSA programs, minimize the impact on your employees and assist in providing the necessary Direct Rollover/Transfer Request Form and instructions for your employees. Pick an administrator who is skilled with taking over existing programs.
I Offer My Employees Other Benefit Spending Accounts, Such as Flexible Spending Accounts (FSAs). Can They Be Administered by the Same Entity?
Yes. It’s possible for the full suite of employee benefit spending accounts, including Health FSAs, Dependent Care FSAs, Health Reimbursement Arrangements (HRAs) and other benefit spending programs such as Transit accounts, to be administered through the same employer portal. Your employees benefit from viewing and managing their accounts in one location and accessing available account funds on a single debit card.