HSA Savings: 4 Myths to Debunk and Boost Their Savings
May 22, 2019
The average American spends over $4,500 per year on healthcare costs! And the older they are, the more they spend on healthcare. Health Savings Accounts (HSAs) are an invaluable tool for healthcare savings in both the short-term and long-term, since all funds carry over from year to year.
Participants in the HSA savings stage have between $1,000 and $4,999 in their HSAs. They’ve transitioned from the spending stage (where participants have less than $1,000). They pay out of pocket for expenses they can afford, which helps them build up their balances for bigger expenses later or for retirement planning. Keep reading to find out what myths you can dispel to help your HSA savers get even more out of their accounts. And complete the form below to download two free resources to learn about recent HSA trends and innovation.
Myth #1: Participants Can Only Change Contributions at the Start of Their Plan Year
A number of reasons can spark a participant’s desire to change their contribution amount: a raise, unexpected healthcare needs or dependent changes (such as the birth of a child). Whatever the reason, your employees will be happy to know they can change their contribution amount at any time during the plan year. This means they can set aside more in their account and continue to build HSA savings whenever they’re ready and able to do so.
Myth #2: HSA Funds Can Only Be Put Aside in a Cash Account
With an HSA, participants can leverage both a cash account and an investment account. Most participants keep their funds in the cash account, where funds can accrue interest. But many of your employees might not realize they can also invest their funds (usually once they reach a minimum threshold amount).
History shows that the expected rate of return on mutual fund investments is much higher than the standard interest rate. Our enhanced investment experience through participants’ online accounts makes it easy for them to make a one-time transfer between their cash account and investment account.
Myth #3: Earnings on Interest is Taxed
HSAs are sought after for their triple-tax advantage. All contributions are tax-free, and distributions are also tax-free if the funds are used to purchase eligible expenses. The third tax advantage is that all earnings within an HSA are also tax-free. That means any growth in funds (through interest or investment) isn’t taxed.
Myth #4: Participants Can Only Contribute Funds for a Tax Year in the Same Plan Year
Even when the plan year has passed, it’s not too late for your employees to contribute funds to their HSA. If they haven’t maxed out their contributions for a plan year, they can still make additional contributions to that plan year up until the tax return deadline for that plan year. (It’s recommended they do this by early April so there’s enough time for any changes to process in their accounts before the mid-April tax deadline.)
Find out what’s new with HSAs and the innovation that simplifies these accounts by completing the form above.
(Please note: Discovery Benefits cannot provide investment advice and encourages its participants to seek guidance from a financial adviser for help with investment decisions.)