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HSA facts
Health Savings Accounts (HSA)

5 misunderstood HSA facts

March 12, 2024

Health savings accounts (HSAs) have become increasingly popular, but they often come with misconceptions as well. To help your employees make informed decisions, let’s debunk some common HSA myths and shed light on the HSA facts that truly matter.

HSA Fact #1: HSAs are employee-owned

While employers may choose to contribute to your employees’ HSAs, it’s important for employees to remember that they have control and ownership over their HSA. This means employees have the freedom to decide how to spend their funds, regardless of their job changes. This type of flexibility is a significant advantage of HSAs, providing peace of mind and encouraging enrollment. Knowing their HSA remains theirs to keep, even if they move on to a new opportunity, allows participants to take control of their health savings and plan for the future.

HSA Fact #2: Open an HSA, regardless of income

HSAs offer tax advantages for everyone, regardless of income. Contributions are tax-deductible, and qualified withdrawals for medical expenses are tax-free. This can be particularly beneficial for lower-income individuals by helping them stretch their healthcare dollars further. By understanding this broad-reaching benefit, employees will see HSAs not as intimidating, but as an opportunity to save on everyday healthcare expenses.

HSA Fact #3: HSAs can be powerful retirement tools 

HSAs offer the double benefit of saving for current and future healthcare needs. Unlike flexible spending accounts (FSAs), funds roll over year to year, allowing them to grow over time. But do your employees know they can take it a step further and invest their HSA funds?

HSA investments have the potential to accelerate tax-free growth, creating a valuable long-term savings vehicle for retirement or unexpected medical costs. However, the Employee Benefit Research Institute (EBRI) found that only 12% of HSA holders utilized this powerful tool in 2021. Help your employees explore the investment opportunities within their HSA so they can unlock its full potential for tax-advantaged growth and financial security.

HSA Fact #4: “Use-it-or-lose-it” rule out the door

HSAs offer unique advantages that set them apart from FSAs. Unlike FSAs, unused funds in an employee’s HSA carry over to the next year, allowing their savings to accumulate over time. And with the ability to invest their HSA funds, employees can potentially grow their savings and create a valuable long-term asset for retirement or future healthcare needs. 

Due to these benefits, employees should consider contributing the maximum allowable amount under IRS limits. This allows them to take full advantage of tax savings and accumulate a substantial nest egg for future healthcare expenses. By communicating the key differences between HSAs and FSAs, you can empower your employees to make informed decisions and enjoy the full potential of their HSA contributions.

HSA Fact #5: Qualify for a HDHP? Benefit from an HSA

As long as an employee is enrolled in a qualifying high-deductible health plan (HDHP), they can benefit from an HSA. HSAs offer a powerful duo of tax benefits and financial security, appealing to all individuals, regardless of their current health status. Here’s how HSAs benefit everyone:

  • Lower taxable income
  • Save for current and future healthcare expenses
  • Peace of mind for unexpected needs

Clearing the air about HSAs

By sharing these HSA facts with your employees, you can help them confidently navigate the world of HSAs and unlock their full potential for saving and financial security. Check out our handout to learn more about common HSA misconceptions!

The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own legal counsel, tax and investment advisers. 

WEX receives compensation from some of the merchants identified in its blog posts. By linking to these products, WEX is not endorsing these products.

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