The Untapped Potential of Health Savings Accounts (HSA)

Health Savings Accounts (HSA) are still one of the most overlooked options in employee benefits. A recent Fidelity Investments report showed that “1 out of 2 Americans are unfamiliar with HSAs and their triple-tax advantage”. That means tons of employers, and their employees, are missing out on the incredible features that make HSAs so great. With healthcare costs soaring, we want to show that HSAs aren’t just an extra perk: they’re a complete game-changer for both employers and employees. Let’s dive in to the misunderstood and underutilized HSA features more employers should know about.

For starters, those who know of HSAs often see them as just another benefit account with the same old features. According to Fidelity Investment’s 2023 Health Care Outlook report, 46% of Americans incorrectly believe HSAs have a “use-it-or-lose-it” rule, and 51% don’t know that HSA dollars can be invested. But that’s not the case! Health Savings Accounts are unique in that there’s no use-it-or-lose-it rule for leftover funds, and dollars contributed can be invested and grow tax-free!

This brings us to another remarkable HSA feature: the triple-tax advantage. Triple-tax advantage means that contributions go into the account tax-free, existing funds grow tax-free when invested, and withdrawals are tax-free when used for qualified medical expenses. Plus after the age of 65, there’s no penalty for withdrawals made for non-qualified medical expenses. Instead, those funds are taxed at the participant’s standard income tax rate. It’s the closest thing to a no-brainer in the world of benefits!