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Adding the HSA Module with the Health FSA and/or HRA provides more options for tax savings


Written by Loretta Graham-Giles, Manager of CoreAdmin

The options for tax-free health benefits have become very limited for the Employer with 1-50 Employees due to Health Care Reform. Including the HSA Module with the Health FSA and/or HRA allows the Employer to provide more options for tax savings to their valuable Employees that will cut the cost of the matching Federal Payroll Taxes for the Employer. Many Employees of small businesses are enrolling in health insurance plans through the State/Federal Exchange and these premiums cannot be pre-taxed through the Premium Only Plan because they are already tax-advantaged.

To allow your Employee to pre-tax HSA contributions they must meet the following criteria (the critera does not apply to family members, only the Primary):

– They must be enrolled in an HSA-qualified High Deductible Health Plan (HDHP)
– They cannot be covered by any other insurance that reimburses for health expenses (including a medical FSA/HRA – see Limited FSA/HRA information above)
– They cannot be enrolled in any part of Medicare or Medicaid
– They Cannot be eligible to be claimed as a dependent on another person’s tax return
– They must be over 18 years of age

Many Employers prefer to provide an HRA benefit that will give the Employee an additional medical benefit, or buffer the gap between their group Health Plan’s deductible and it’s coinsurance. Understandably so, since the HRA benefit is only paid out if the Employee has an actual expense, but the HSA funds are kept by the Employee whether they have an eligible expense or not.

Including the HSA Module in the Premium Only Plan Document opens up more opportunities for the Employer to provide other tax-free benefits to their Employees, even if the Employer does not provide a group Health Plan. Employees will be encouraged to enroll in an HSA compatible Health Plan which then gives the Employer the option to fund a certain amount to each of their Employees’ HSA accounts tax-free. This funding can be done monthly, once each year, or whenever the Employer would like to make the contribution. In order to keep the contribution tax-free they must make a comparable contribution to each Employee’s HSA. This will provide an additional tax-free benefit to the Employee that will be much appreciated.

If the Employer wants to provide a very worthwhile benefit to their Employee(s) that will continue to benefit the Employee, possibly even into retirement, this is an option they may want to consider. And, this is an option that can be increased and decreased each year as the Employer’s budget allows (unlike taxable wages).

Why should an Employer provide HSA Administration to their Employees?

1. Convenience and greater benefit for the Employee. The chance of an Employee contributing to their HSA through pre-taxed payroll contributions will increase if you provide an easy way for the employee to set up their HSA and begin funding it right away.
2. Increased Savings for the Employee and Employer. Increased tax-free payroll deductions for the Employee mean decreased matching Federal payroll taxes for the Employer.

If you have clients that would like to begin allowing their Employees to pre-tax their HSA contributions, and you would like to make them available on the BennyCard through CoreAdmin, when you place your order for the Premium Only Plan with HSA Module, add “Please Provide HSA Admin Set-Up” in the Notes section.

We will then send an HSA Administrative Services Agreement to you with the forms required to set up the Bancorp HSA Employer Account.

Send your questions about HSA Administration and Coordinating your HRA/FSA with your Employee’s HSA benefit to Loretta @ CoreAdmin.info.



Read more about the HSA Module with the Health FSA and/or HRA and other tax-saving options:

Some of the features that make HSA Administration through Bancorp a great decision

Fringe Benefit Taxation and Section 125, HRA, HSA Plans for Owners and Employees

Why should an Employer provide HSA Administration to their Employees through CoreAdmin?

HSA Administration with Debit Card and How To Coordinate with HRA/Health FSA