As we’ve discussed before, businesses with fewer than 50 employees have several choices when it comes to health insurance options for small groups. According to an infographic and information from Discovery Benefits, health savings accounts (HSAs) emerge as a clear winner for small business health insurance. As the infographic shows, HSAs offer numerous benefits for both businesses and employees.
Infographic: HSA Benefits for Businesses and Employees
Source: Discovery Benefits
HSA Benefits for Businesses
According to the infographic, HSAs, which must be paired with a high-deductible health plan (HDHP), offer employers a number of advantages:
- Cost savings. HDHPs are often more affordable than other small business health insurance options.
- Tax advantages. All employer contributions are tax deductible.
- Employee retention. Benefits packages that include HSAs are more robust compared to other plans—which can help boost employee retention.
HSA Benefits for Employees
HSAs also offer perks to employees, including:
- Triple tax savings. Employee contributions are not taxed, withdrawals that go toward authorized expenses are tax-free, and the account earns tax-free interest on the balance.
- Balances that roll over. Unlike other small business health insurance options, such as a flexible spending account (FSA), money in an HSA rolls over to the following year and beyond, ensuring employees don’t lose money they have accumulated.
- Cost savings. Money employees contribute to an HSA is not taxed, which means they save on authorized medical and related expenses.
- Retirement savings. Because an HSA is a savings—not a spending—account, employees can grow their money over the years, building up tax-advantaged funds that can eventually be used for retirement.
Curious if an HSA could work for your small business? We’ve written extensively about HSAs as a good complement to small business health insurance. Check out these articles for more information:
- HRA vs. HRP vs. HSA vs. FSA - An Easy Comparison Chart
- How HSAs Are Even Better Retirement Accounts Than IRAs
- FAQ: What Is an HSA High Deductible Health Plan (HDHP)?
- Comprehensive List of HSA-Eligible Expenses
- How to Tell If Your High-Deductible Health Plan Is HSA Qualified
What questions do you have about HSAs and small business health insurance? Let us know in the comments.