The talk around Health Savings Accounts (HSAs) has been growing, as politicians and journalists continue to discuss this relatively new benefit offering. These news stories, blog articles and talking points are fueled by the skyrocketing participation in these accounts across the country.
Introduced in 2004, employees quickly jumped at the chance to make pre-tax contributions in HSAs. Between 2006 and 2016, participation in HSAs surged from 3.2 million to 20.2 million, according to America’s Health Insurance Plans (AHIP), the national association of health care coverage providers and related services.
Most of this growth stems from more people learning about the many advantages provided by HSAs. As the word spreads about the different benefits available from HSAs, participation rates are only expected to continue increasing in the coming years.
It’s easy to see why. Just consider these five advantages of using health savings accounts:
You keep the money in your HSA for the rest of your life.
1. The money is always yours
HSAs are different from Flex Spending Accounts in that the contributions roll over from year to year. You keep this money for the rest of your life to pay for any medical expenses incurred while you have the account.
Further, unlike other tax-advantage instruments like an individual retirement account, an HSA has no age minimum before you can make use of the money.
2. They offer a trifecta of tax benefits
HSAs represent a tax-advantage instrument with three separate advantages:
- Contributions are pretax (or tax-deductible).
- Interest earned is tax free.
- Withdrawals for qualified medical expenses are tax free.
These vehicles have the most preferential treatment under the tax code compared to other instruments, and they make for an ideal tax-saving opportunity to put money aside for later.
The money you contribute to a health savings account is made pre-taxes.
3. Pay for COBRA coverage
Although an HSA cannot generally be used to reimburse the cost of health insurance premiums, it can be used to cover COBRA expenses. If you leave your job and rely on COBRA for health benefits, you can use the funds in your HSA to reimburse yourself for premiums during COBRA coverage, according to the IRS. This helps provide a financial patch over any tumultuous times.
4. Use the money for investments
The money you fund into the account is yours to use as you choose. While most people will no doubt rely on this money to pay for medical expenses, you are free to invest your contributions in mutual funds or other investment vehicles. You can let your investments build for use during retirement. You can even save your receipts from eligible medical expenses over the years to reimburse yourself tax-free at a later date.
5. Easy to use
Spending the money in your HSA isn’t a complicated matter involving piles of forms and weeks of waiting for a reimbursement check to arrive in the mail. When you sign up with Benefit Resource, for example, you receive a Beniversal Prepaid Mastercard that can be used just like a regular credit or debit card to pay for medical products or services.
In addition, you gain access to online bill pay and transfers, making it easy to reimburse yourself or move funds from a personal bank account into your HSA.
Click here to learn more about the many advantages of using a health savings account.