A health savings account (HSA) offers your employees a tax-advantaged way to save and pay for qualified out-of-pocket healthcare expenses. The employee must be covered by a high-deductible health plan to be able to take advantage of a HSA.

A high-deductible health plan is health insurance with deductible amounts that are greater than standard insurance plans. The monthly premiums for this type of health insurance are typically less expensive because employees agree to take on more of the upfront cost of medical care. For 2021, these deductibles are at least $1,400 for individual or $2,800 for family coverage.

Yes. High-deductible health plan premiums are much lower than the typical HMO and PPO premiums. Many businesses are finding these health plans affordable for their companies and their employees.

Employee contributions can be made to a HSA on either a pre-tax or post-tax basis. When employees make contributions pre-tax it is done through a Section 125 plan (also called a salary reduction or cafeteria plan), generally through direct deposit of payroll. If employees contribute funds on an post- tax basis, the amount can be deducted from their taxable income.

No. Employers are under no obligation to make any contributions to their employees' HSAs. Many employers find that making a contribution to employees' HSA accounts may help improve adoption of HDHPs and HSAs, especially if they are transitioning from a more traditional type of health coverage.