How a Health Savings Account Can Help You Combat Inflation

How a Health Savings Account Can Help You Combat Inflation

While there are many negatives of 40-year high inflation affecting businesses, one positive is a significant increase in Health Savings Account (HSA) and High Deductible Health Plan (HDHP) limits for 2024.
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HSA participants covered by an individual HDHP can contribute up to $300 more in 2024, and those covered by a family HDHP can contribute up to $550 more. The $1,000 catch-up contribution for those age 55 or older remains the same. Remember that unspent HSA balances roll over from year to year, so there’s no fear of use-it-or-lose-it as there is with Flexible Spending Accounts (FSAs).

How can HSAs help your employees combat inflation? 

In the long run, the tax advantages of HSAs and the investment options some HSA administrators offer can help hedge against inflation.

  • HSA contributions are pre-tax (or tax-deductible)
  • Interest earned is tax-free
  • Deductions are tax-free if spent on eligible expenses

However, according to a recent Employee Benefit Research Institute (EBRI) study, less than 10% of HSA account holders are currently investing their HSA balances. Depending on the rate of return, this option could allow account holders to beat inflation over time.

But what if an employee has a medical expense while the market is down? 

Employees are not required to use HSA funds to pay for eligible expenses in the same year those costs are incurred. Deferring the use of HSA funds to pay for medical expenses creates a “cheat code” used by savvy investors who leave their HSA in the market, paying all ongoing eligible expenses out of pocket while keeping receipts for IRS purposes. Account holders decide when to withdraw a tax-free lump sum, which could be years (or decades) later. Depending on the total of eligible expense receipts that they accumulated over the years, this could amount to tens of thousands of tax-free dollars that can be spent on whatever they want.

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Some studies suggest retirees should set aside $300,000 or more for health care costs during retirement. So why not put pre-tax money away now to pay for future medical expenses with tax-free dollars? And due to record inflation, you can save even more next year.

High inflation and concern over a possible recession make retaining top employees a priority for organizations. While significant compensation increases may not always be possible, a better total compensation package, including quality employee benefits and education for employees on how to make the most of these benefits, can help. Let CBIZ show you the right way to HSA. Connect with an expert today.

How a Health Savings Account Can Help You Combat Inflationhttps://www.cbiz.com/Portals/0/Images/CBIZ_HCM_article_hsa_limits.png?ver=WpBDJ9ySVNe0KUMf4hiTVQ%3d%3dhttps://www.cbiz.com/Portals/0/Images/2024-HSA-HDHP-Limits-Graphics.jpg?ver=KVEVpsMXwaFR7aBNcpe2uA%3d%3dDid you know you can use the upped HSA limits for 2023 as a tool to combat inflation? Use these tips to leverage your health savings accounts. 2023-06-13T16:00:00-05:00

Did you know you can use the upped HSA limits for 2024 as atool to combat inflation? Use these tips to leverage your health savingsaccounts.

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