Business Health Savings Accounts – Facts You Must Know.
Business health savings account (HSA) – definition
It refers to an account of accumulative funds for an individual employed in a small business. This may be utilized for paying primarily non reimbursable medical costs. Tax deductible contributions made by an employee and/or an employer are directed towards this account.
The total amount is exempt from taxes for the account holder and is portable. HSAs came up in 2003 rightly as a boost for individuals for saving on qualified medical as well as retirement health expenses, with an accompanying tax advantage. Funds from this account, if withdrawn for legitimate medical expenses are non-taxable. Unused funds can be rolled on without penalty.
Businesses make use of health savings accounts in order to save
Lots of businesses around the globe offer great benefits for their employees. One of the commonest benefits given by an employer of any size, be it small businesses, medium-sized businesses or large corporations is health insurance. Different insurance programs offer incentives to businesses so that they provide group healthcare plans to employees at lower rates in comparison to individual healthcare schemes.
However, it is seen that despite the lower prices of healthcare coverage employer’s plans, several businesses as well as employees may achieve higher savings and even get long-term monetary benefits through the health savings account programs.
Through this plan, employees decrease their income tax burdens and at the same time accumulate greater wealth. Since employees exercise control on their personal healthcare plans, employers are saved from the burden of looking after the healthcare plans for all their employees. This results in reduced paperwork for the businesses, increased employee privacy, and reduction in overhead expenses.
Steps for employees to make full use of the health savings account
– Firstly, employees must get enrolled in a proper higher deductible insurance program. Employers can advise appropriate plans to their employees on the basis of region.
– Next, employees must create their health savings account through a particular savings institution like a bank. In order to establish the savings account, the employees should deposit a small amount into their account.
– To get maximum amount of tax benefits, it is vital that health savings accountholders must contribute quite a good amount each year, though there exists obvious cap on the amount of contribution.
Advantages of health savings account
The benefits associated with businesses health savings account are many. These are:
– These can be used combining with a high-deductible healthcare plan.
– The contributions towards the health savings account are not included in one’s gross income. These are basically tax free.
– The health savings account program can help employees to be better healthcare customers.
– The payouts associated with appropriate medical expenditure are tax-exempted.
– The individuals enjoy the benefit of the savings which can be transferred from one employer to another employer.
– The savings can be rolled over every year for creating a reasonable amount of retirement benefits.
– The accumulated dividends and interests are tax deferred or tax free.
Health savings account is thus a useful weapon for employees to save money, reduce taxes and make their wealth grow.