What is the tax treatment for employee contributions?
Contributions to their HSA can be made on an after-tax basis and taken as an above-the-line deduction on their tax return, or employees can make pre-tax contributions through a Section 125 plan (commonly known as cafeteria plan).
What if I make contributions as an employer?
Employer contributions are excluded from any employee's income. Employers must make comparable contributions to all employees' HSAs unless made through a Section 125 plan.
Does my business structure affect contributions?
Yes. In general, self-employed, partners and S-Corporation shareholders are not considered employees and cannot receive pre-tax employer contributions. Self-employed can only take an above-the-line deduction for their premium and HSA contributions. S-Corporation and LLCs cannot make pre-tax contributions to owners, shareholders or partners.
How can I make HDHP more accepted by my employees?
Make it easy to understand. Emphasizing employer contributions and/or employee savings instead of higher deductibles helps. Show HSAs are affordable by providing examples of how much can be saved for future use.* Your insurance provider should have these examples or check reliable sources on the internet.
What happens in group enrollment?
We'll develop an agenda with you to assure your employees have answers to their questions. We'll provide account information and applications. If you are making contributions to your employees' HSAs, we'll get consent to provide you a list of their HSA numbers and talk with you about options for electronic banking to make those contributions. Finally, we'll open all the employee HSAs and send them checks and a VISA® HSA debit card.
* In general, HDHPs have a lower annual premium that can be shared savings for employers and employees. Employees who make contributions will experience a reduction in their Federal income tax and can save HSA funds for future use depending on their average out-of-pocket expense for medical expenses not covered by their HDHP deductible.