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Helping Employees Maximize Their HSA Benefits

Healthcare is expensive, but HSAs help take some of the stings out of buying prescription medications, putting braces on the kids, and doctor's visits throughout the year. Many employees don't fully understand how to maximize the value of their HSA. Helping them navigate the rules and estimate the ideal contribution, the more they will get out of the benefit. To that end, the following are some ways you can help your employees make the most of every dollar they earn.

The first thing you need to do is update employees on the contribution limits for 2020. The maximum contribution this year is $3,550 for individuals and $7,100 for families. For individuals over the age of 55, the catch-up limit is unchanged at $1,000. Regarding long-term care premiums, individuals can cover long-term care premiums at a rate of $780 for individuals between 40-50, and $5,200 for individuals over the age of 70.

It is a good idea to tell employees about the "last month" rule. Eligible employees can contribute the full amount to their HSA in December. The rules allow employees who are qualified on December 1 to contribute the yearly maximum into their accounts. This rule also applies to catch-up contributions. However, there is a caveat. Employees must remain enrolled for the full calendar year. Otherwise, they must prorate the contribution and report the ineligible amount as taxable income to the IRS.

You will want to tell employees about their ability to transfer funds from IRA or Roth IRA accounts into their HSA. The rules allow individuals to perform a one time transfer from their IRA or Roth IRA into their account. Individuals can perform this transfer at any time. However, they cannot exceed the maximum annual contribution limit. For most employees, it is best to wait to complete this transfer at a time when a known healthcare expense is on the horizon, such as a planned surgical procedure, braces for a child, physical therapy, etc.

Additionally, remind employees that they can consolidate their HSAs. Many have accounts with a previous employer, and the rules allow employees to transfer remaining funds from old reports and combine them within their new accounts. This can be a significant advantage, especially in situations where the individual is required to contribute an initial sum to participate in the plan.

Similarly, help employees understand that their HSA benefits can continue growing tax-free after they pass away. This is possible because the rules allow the transfer of the benefits to their spouse. However, when transferring to children following the account holder's death, the funds are considered taxable income during the year the child receives the payout. But, there is a way around this. Individuals can transfer up to $15,000 per child, per year, into their HSA because the IRS considers it a gift.

Finally, help employees keep their healthcare expenses organized. Many fail to use their funds because they lose the receipts. As time passes, these little slips of paper fall between the cracks, and funds go unused. Give your employees a folder or other container emblazoned with the company logo that they can put their receipts into and store them safely until they are ready to request reimbursement. It's a simple thing to do, but it will go a long way towards helping your employees file for reimbursement.

Contact Greenlink Payroll at (480) 385-2525 for more information on how you can help your employees get the most out of their HSA plans. It's our pleasure to help you build and maintain a healthy business.

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