Should Your Business Offer an HSA/HRA?

There are many advantages for a business to offer a Health Savings Account (HSA)/Health Reimbursement Arrangement (HRA) to employees.  With the rising costs in health care, many people are concerned and looking for ways to save money. As an employer, there are many considerations to keep in mind when making this decision.

Key considerations for an HSA:

• Potential for tax-free earnings and pre-tax payroll contributions may aid in employee attraction and retention.
• Additionally, employees will be able to save or spend the money on qualified health care expenses as they feel necessary.  The money stays with the employee even when he or she changes jobs.  
• As an employer, the contributions into the HSA will lower the tax liability of the business by lowering payroll and payroll taxes.
• There is flexibility because employers have the choice whether or not to make contributions.
• Important to know: There is a requirement to be enrolled in a qualifying High Deductible Health Plan to have an HSA. Contributions limits apply: $3,400 for individuals and $6,750 for families.

Key considerations for an HRA:

• Funding is done entirely by the employer and any residual balance when an employee leaves the company belongs to the employer 
• HRA participants must have minimum essential coverage, but a high deductible plan is not required.
• Similar to the HSA, the contributions into the HRA will lower the tax liability of the business.
• In contrast to an HSA, there are no contribution limits.
• HRAs offer great flexibility in plan design and this enables the employer to tailor a benefit package that best suits their needs.

The decision to incorporate an HSA/HRA into your business can provide many benefits to you as the owner and to your employees.  Take the time to research and understand both types of accounts as they continue to rise in popularity