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Spread the Word About Additional HSA Contributions

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Mar72024
bag full of money
bag full of money

If you have staff with health savings accounts, they still have until April 15 to make additional contributions to their accounts if they want to reduce their tax bills for last year.

HSAs allow your employees to put away funds to pay for future medical expenses. Usually, these accounts are funded with pre-tax deductions from your employees’ paychecks, but if they didn’t max out their contributions last year, they still can do so up until the tax-filing deadline.

Under IRS rules, for 2023 employers and employees can contribute a combined $3,850 for single employees and $7,750 for families. (For 2024, the limits are $4,150 for single coverage and $8,300 for family coverage.) Since funds workers contribute to their HSA are made before their salaries are taxed, they reduce their overall taxable income.

Employees 55 and older can contribute an additional $1,000 every year as a catch-up contribution on both single and family plans.

One of the key features of these plans is that the funds in them can be carried over from year to year and can be invested like a 401(k) plan. Funds in HSAs can be used to pay for a myriad of out-of-pocket medical-related expenses, pharmaceuticals and medical devices. Withdrawals to reimburse for these expenses are also not taxed.

Not everyone is eligible to participate in an HSA. They are only available to employees enrolled in a high-deductible health plan. HDHPs feature lower premiums in exchange for a higher deductible, meaning the employees have to pay more out of pocket before coverage kicks in.

 

Spread the word

Consider sending out a memo to your staff reminding them that if they didn’t max out their HSA contributions last year, they can still do so until April 15.

Under IRS rules, even staff who didn’t have an HSA last year are eligible to open one for 2023 and contribute funds to the account up until April 15. The only catch is that any funds they contribute can only be used for future medical bills after the account is set up.

The HSA administrator will generate the required tax forms that your employees will need to include when filing their taxes. There are two forms:

  • IRS Form 5498-SA, which reports contributions, and
  • IRS Form 1099-SA, which reports distributions taken out of the HSA.

 

Individual filers must also report the figures on those two forms on IRS Form 8889.

InterWest Insurance Services
Author: InterWest Insurance Services

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