When health savings accounts (HSAs) took effect more than 20 years ago, some initially thought HSAs would not be used by rank-and-file employees and would be used only by executives.

“That has not proven true,” said Chris Keller, an attorney with Groom Law Group in Washington, D.C. “Financially savvy employees of all income levels have figured out that HSAs are an excellent vehicle for saving money for future medical expenses.”

HSAs are a benefit that employers and employees should learn about to decide if they are right for their organizations or themselves, she added. Here are some pros and cons of HSAs for employees and benefits administrators.

What Are HSAs?

An HSA is a funded account, similar to an individual retirement account, Keller noted. Contributions may be made within specified limits by individuals who meet certain eligibility requirements and/or by employers or others on behalf of such individuals.

Amounts in an HSA grow on a tax-deferred basis. If used for qualified medical expenses, amounts in an HSA may be distributed tax-free. In order to contribute to an HSA, an individual must be covered under a high-deductible health plan (HDHP) and may not participate in any other non-HDHP.

There are contribution limits for HSAs that usually increase each year. For 2024, the limit for self-only health coverage is $4,150, and the limit for family coverage is $8,300. For 2025, those figures rise to $4,300 and $8,550, respectively.

Advantages of HSAs for Employees

The...

Read Full Story: https://news.google.com/rss/articles/CBMimgFBVV95cUxNSE85dXphcFVTRzM2WVhOYU1H...