As 2014 draws to a close, it’s a good time to remind employees to maximize their health savings account (HSA) contribution to leverage the account’s tax benefit. Under-contributing to an HSA is a common health benefits mistake employees make and one that can be avoided.
The IRS sets the guidelines for how much employees can contribute to an HSA each year. Here are the limits for 2014 and 2015:
Employees have until the tax-filing deadline (typically April 15, 2015) to make allowable 2014 contributions. The annual limit can be met in smaller deposits throughout the year or in one large deposit. Employees over age 55 can make “catch-up” contributions of an additional $1,000 deposit per year.
There’s much to be gained from a tax perspective with an HSA; specifically, tax savings three ways, or a “triple tax advantage.”
- The money the employee puts into the HSA is tax deductible
- The savings grow income-tax free
- Employees don’t have to pay income taxes on withdrawals used for qualified medical expenses.
In addition to the tax benefits, an HSA is an excellent way to fund health care into retirement. Unfortunately, not all employees who are eligible for an HSA take the time to open one. Now is an ideal time to encourage those employees enrolled in a high deductible health plan who haven’t opened an HSA to do so, and to maximize their contribution.
Employers who offer Optum Bank HSAs to their employees receive comprehensive resources to teach employees how to plan, save and pay for health care. One of the best ways to get your employees engaged in saving is for the employer to make contributions to their HSA. For more information, visit www.optumbank.com