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How to get your employees to contribute more to their HSAs

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Zina Kumok
By Zina Kumok on April 25, 2018

A trained journalist, Zina Kumok is a freelance writer specializing in personal finance. Connect with Zina Kumok on LinkedIn

As more companies encourage their employees to sign up for high deductible healthcare plans, more employees are becoming eligible for HSAs. Unfortunately, being eligible is just the first step. Much like a 401k, there’s not much point to having an HSA if you don’t actively contribute to it.

Many employees are completely in the dark about their HSA, and many more just don’t see the benefit to contributing — and that doesn’t just affect them. When an employee is inadequately prepared for healthcare costs, they can find themselves in a situation that lowers productivity and morale for everyone around them.

If your employees don’t seem interested in contributing to their HSAs, don’t fret. Here’s how to convince them.

Break down the benefits of an HSA

It lowers your taxable income

Your employees probably know that contributing to a traditional 401k will decrease what they owe in taxes, but they might not realize that an HSA has the same benefit. Each dollar added to an HSA will lower their taxable income.

Make sure to point out that the company's contributions are also excluded from their gross income. Even if you seed your employees' HSAs with $1,000, it won’t affect their total taxable income.

It means you pay less for healthcare services

HSAs offer another amazing tax benefit — the ability to use pretax savings to pay for healthcare services. This means you never pay tax on the money you're spending on medical needs, whether it's a co-pay at the doctor's office or a new pair of glasses.

Unlike an FSA, it rolls over each year

Unlike an FSA, you can use the money in your HSA at any time, since it rolls over year after year. A 25 year-old employee can contribute to an HSA and use those funds for a surgery they need at 35, for example.

There's a lot of flexibility with contributions

HSAs employ a lax contribution policy compared to the more stringent FSA. Consumers can change their HSA contribution schedule at any time and for any reason. Employees may not realize they’re not bound to the amount they chose at the beginning of the year — they're free to increase or decrease contributions as their needs change.

It serves as a safety net for a rainy day

Some employees, particularly those who are young and healthy, might not be able to imagine spending thousands of dollars on medical expenses. Show them how healthcare needs change as they get older, especially if they start a family. If a 25 year-old employee starts saving $1,000 a year in their HSA, they could have more than $5,000 by the time they’re ready for a family in their 30s.

Convince them it's worth their time

Communicate with them often

Mentioning an HSA once during open enrollment may not be enough to convince your less savvy employees. A 2017 HR survey suggested that employers should should frequently discuss the benefits of HSAs to increase their enrollment, such as once a quarter.

Seed their account

Company contributions can spur an employee to save in an HSA if they’re tied to a matching program, similar to a 401k. Even a $100 match can help an employee get started.

Research shows that "generous employer contributions to HSAs are correlated with an increase in employee selection of high-deductible health plans when they are presented with both traditional health coverage and CDHP options."

Go through the savings math

If an employee is waffling on the idea of contributing to an HSA, give them an example of how HSA contributions will lower their taxes. The average American spends thousands of dollars on healthcare costs every year, not including monthly premiums. Show them that if they paid for those expenses with an HSA, they would owe less on their taxes.

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