Health Savings Accounts

Additional Information

Small Group HSA

Smaller, family-owned-and operated businesses

An employer in this situation may want to provide major medical coverage and allow his/her family members accumulate funds placed in the HSA. The employer can use the premium savings realized in switching from a low deductible plan to a high deductible one to fund the HSA. The funds thenbelong to the employees � in this case the family members. Accumulated funds can be used to cover future medical expenses, to pay for a long-term care plan or to supplement retirement income.

Groups of highly compensated professionals such as attorneys and physicians

In these groups, the owners may be most interested in maximizing benefits and tax savings. The owner can pay for the insurance premiums with tax-deductible dollars and make tax-deductible contributions to HSAs. Being highly compensated, many of the employees may prefer to pay for ordinary medical expenses with out-of-pocket funds and let their HSA funds accumulate while earning tax-deferred interest.

Groups in which employees share in health insurance premium

Many employers have employees pay part of the premium costs. Employers switching to a high deductible plan may be able to pay the entire premium without increasing their outlay and let the employees contribute to their own HSAs. Employers can save money and employees are typically pleased because they are saving money for themselves instead of paying premium to an insurance company.

Partners or shareholders in a Subchapter S Corporation

Generally, partners and sole proprietors are considered self-employed individuals. In addition, a shareholder/employee who owns more than 2% of stock of an S corporation is treated as a partner for purposes of applying the fringe benefit rules. Therefore, these individuals may not qualify for a HRA. They should be able to set up HRAs for their employees and establish an HSA for themselves.

Groups with employees who have different needs

A high deductible/HSA combination may not be right for everyone in a group. The Employee Choice Program allows an employer to establish up to four plans to meet different needs. The employer can determine how many of the plans will be HAS-qualified any may even offer a specially designed HRA plan as an alternative. Employees then select from the plan offerings and choose whether or not to enroll in an HSA plan.