A study from the Kaiser Family Foundation (KFF) revealed that the average premium for employer-sponsored health coverage amounted to $6,896 for single coverage and $19,616 for family plans during 2018. They also noted that the average single premium rose by 3% over the previous year, while the average family premium went up by 5%. That amounts to a more than a 20% increase since 2013.
Instead of paying bigger premiums, many employers are now offering a high-deductible plan, which makes their workers eligible for a Health Savings Account (HSA). An HSA allows people to make tax-free deposits and then withdraw them as needed to help pay for healthcare expenses.
As an employer, you too may make contributions, and can enjoy a number of benefits for doing so. What are some benefits you might notice from contributing to your employees' HSA accounts? Here are just a few you may wish to consider.
Payroll Tax Savings
Section 125 of the IRS Code deals with so-called "cafeteria plans." What these plans do is allow your employees to convert their taxable salary and benefits into something non-taxable. In other words, it allows you to offer matching contributions to your workers' HSAs, while lowering the amount of payroll taxes you are liable for. So right away, you are noticing a tax reduction, in addition to the cash you have already saved by switching to a higher-deductible plan.
You will save money in the way of FICA taxes each time someone contributes to his or her HSA. All contributions are made on a pre-tax basis, meaning that you will only be liable for the amount of taxes on the remainder. If you have several people contributing to their HSA, this can really add up to some tremendous savings over time.
It is possible to make contributions without establishing a Section 125 plan first. When doing so, you will need to ensure that any contributions you make are "comparable" for all employees across the board. This can be in the way of equal percentages, or by providing the same exact contribution amounts for everyone.
Encourages Employee Contributions
HSAs are growing faster than ever, and now account for financial assets of more than $53.8 billion. Even so, there are still quite a few people who aren't yet keen on the idea of starting a Health Savings Account. According to a survey by Willis Towers Watson, only 25% of those polled say that contributing to their HSA was a top financial priority. In addition, nearly 43% of all workers who have an HSA have not contributed any of their own funds.
Why are people so hesitant to contribute to a Health Savings Account? One reason could be the idea that they do not feel they can afford to save money. These individuals might quickly change their tune if you begin offering to match their contributions. Remember that you want maximum participation so that you and your employees can both benefit to the fullest.
Rather than matching contributions, some employers provide lump sum payments at the beginning of each year, or offer seed money for opening an account. Allowing people to start with a balance is often enough to jumpstart them into making contributions on their own.
Improves Health and Reduces Absenteeism
Bank Rate reveals that 25% of all American families have had to turn down medical care because they could not afford to pay for it. They note that the average person paid $1,318 in out-of-pocket expenses before they were able to meet their deductible. Many of them are unable to afford this because they are among the growing number of people who have no savings whatsoever.
If your workers are not getting the health care they need, your organization may suffer from increased absenteeism or a loss in productivity. According to the Centers for Disease Control and Prevention, lost productivity due to absenteeism costs American companies more than $225.8 billion each year.
Not all sick employees stay home. Some will engage in presenteeism, in which case they may report for work yet be unable to perform as expected. Many times, these individuals are merely going through the motions, and are actually getting very little accomplished. Harvard Business Review has reported on a recent study which shows that the cost of presenteeism for U.S. businesses is more than $150 billion annually.
Healthy workers are more productive and miss fewer days of work. Accordingly, you could be saving yourself a great deal of money just by making it possible for your employees to receive the health care services they need.
A study performed by Northwestern Mutual reveals that 85% of Americans claim they are experiencing financial anxiety. Twenty-eight percent say they worry about their finances on a daily basis. Forty-one percent claimed that their anxiety was negatively affecting their career, while 70% stated that it had a detrimental effect on their mood.
Why are people worrying so much about their finances? The Northwestern Mutual study also revealed that 34 percent stressed over the possibility of unplanned medical expenses due to an illness. Many of these individuals would feel less anxious if they knew they had some money set aside to handle these expenses.
By offering an HSA and making regular contributions, you can help alleviate stress and increase morale among your own team members. In turn, you should notice greater productivity and a decrease in the turnover rate as well. This means you will spend less time hiring and training people, in which case you will also become more efficient.
Getting Started with an HSA
Now that you understand the benefits of an HSA, you may be wondering how to begin making contributions. That's where we come in, providing you with Human Resources solutions that will help you increase your profit margin and grow your bottom line. As a payroll tax specialist, we can also help you determine how much you might save in FICA taxes by making contributions. To learn more about the benefits of a Health Savings Account for your company and its employees, please contact us.