CLOSING ENTRY: Win-win proposition

With the workforce increasingly becoming younger, millennials are transforming the way business is being conducted. Their familiarity with the internet and mobile technology is driving a wave of consumerism that enables them to purchase just about anything with a few swipes and clicks. Everything from ride-shares to movies to food deliveries are increasingly getting transacted online. Purchasing health care is no different. Organizations are rethinking how they offer such benefits because employees are demanding new options. This market shift is igniting new health care and benefits programs.

Younger employees are gradually moving away from traditional primary care models and choosing health savings accounts or HSAs instead. HSAs can be a tremendous asset for employees looking for coverage while saving money. Think of HSAs as a medical piggy bank. Pre-tax dollars are swept into an account and available to the employee when needed. Since the employee has control over the account, he or she will research and shop for the best provider – thus driving supply, demand and competition. An alternative to traditional health care benefits packages, HSAs can also save employers money on health care expenses.

Let’s take a look at the benefits of HSAs for both employees and the employers.

For employees

Employers offer a variety of health care options to help millennial employees save money and efficiently pay for medical expenses. When deciding which health plan is the best, there are many factors to consider.

Millennials are less likely to find any significant value in traditional health care services compared to generations that came before them since they have fewer health problems to be concerned about. In a calendar year, it is safe to assume younger people only need to make a handful of appointments that include their annual physical and regular dental check-ups. Thus, the costs are significantly lower and provide a way to build a tax-free, interest-bearing health care account that will continue to grow over time.

When paying for qualified medical expenses, HSA money can be used tax-free to help employees pay their high deductible health plans, additional expenses that insurance may not cover or save funds for future medical expenses.

At the end of the year, any unspent HSA money is rolled over and can grow with tax-deferred investment earnings. In the event an employee quits, retires, or changes jobs, the HSA and the money in it is theirs. If the money is continually used to pay for qualified medical expenses, then the money will continue to be tax-free.

For employers

As a business owner, there are benefits to offering HSAs to your employees that will directly benefit you as well.

One of the primary benefits of offering HSAs to your employees is improved employee retention. Lack of benefits is a major factor as to why employees move on from a job. In fact, 80 percent of employees would rather keep a job with benefits than take one that offered more pay with no benefits. Offering HSAs to your employees not only provides them with excellent health care benefits as well as the ability to take control of their health care finances but can also serve as a key component to your employee retention strategy.

Another benefit when pairing HDHPs with HSAs is it can lower insurance premiums. Contributions on behalf of employers to employee HSAs can be used as an income tax deduction for your business. As your employees continue to take control over their health, you will start to notice lower increases on annual premiums. Employers do not have to remit payroll taxes on the pre-tax contributions of employees. Additionally, if you offer an HSA through a section 125 plan (also referred to as a “cafeteria plan”), you can avoid FICA taxes.

If you are searching for a health care plan with flexibility, high level choice, and tax-advantaged savings to offer your employees, HSAs might be the most ideal option for everyone involved.

Steve Rosenthal is CEO of Triton Benefits and HR Solutions. He previously served as CEO of CheckPoint HR and chairman of EPIX, which under his leadership became one of the largest human resources outsourcing companies in the country.