AFTER YOUR EMPLOYEES CONTRIBUTE UP TO THE EMPLOYER MATCH AMOUNT IN THEIR 401( k), ENCOURAGE THEM TO FUNNEL ADDITIONAL AVAILABLE RETIREMENT FUNDS
INTO THEIR HSA BEFORE PUTTING MORE INTO THEIR 401( k).
HSAs
All employers would like to offer the“ latest and greatest” benefits to their employees to help stay competitive and retain key personnel. There’ s no doubt that a strong benefits plan can be critically important for employees choosing between multiple employment offers. Here is where your Health Savings Account can come into play to help lock down that critical employee.
Sad to say, the days of lavish pensions are largely gone. Only those few lucky teachers, government workers and old-time corporate employees may still qualify. For everyone else, employers must take the lead on formulating strategies to help employees save for retirement without relying too heavily on the generosity of Uncle Sam.
AFTER YOUR EMPLOYEES CONTRIBUTE UP TO THE EMPLOYER MATCH AMOUNT IN THEIR 401( k), ENCOURAGE THEM TO FUNNEL ADDITIONAL AVAILABLE RETIREMENT FUNDS
INTO THEIR HSA BEFORE PUTTING MORE INTO THEIR 401( k).
Companies of any size can offer this benefit, which allows participating employees to save and invest tax-deferred income. Often, the funds contributed by the employee are matched by the employer up to a certain percentage.
But popular 401( k) plans are often not the only game in town. Employees that contribute to Health Savings Accounts( HSAs), offered in conjunction with high-deductible medical plans, can also defer taxes on their contributions. Both 401( k) plans and HSAs can provide matching funds to encourage employee contributions and savings. Both assess penalties for early withdrawals while normal tax rates apply to any ageappropriate withdrawals.
The key advantage of HSAs-and it’ s a big one-is that employees can always use the money from their HSAs for qualified medical, dental and vision expenses without paying the government a dime. In addition, after age sixty-five if they want to use the HSA funds to take a family cruise around the Mediterranean they aren’ t penalized, they just pay ordinary income tax.
Here’ s what Bill Barclay, Employee Benefits Advisor at Marcotte, recommends to his company’ s own employees in planning their retirement accounts:“ If your company offers a 401( k) plan with a percentage match, be sure to invest up to the employer match amount in this account first. So if your company’ s matching rate is three percent, that is the minimum that you should be contributing.”
Then, Bill recommends that people do the same with their HSAs:“ HSAs can also receive matching employer funds for medical and related expenses, so be sure to take advantage of this entire contribution too.” Only after both funds are receiving this“ free money” from their employer should employees turn back to the 401( k) account to further increase contributions.“ Our point,” says Bill,“ is for people to stop thinking of an HSA as part of your health plan and start thinking of it as part of your retirement plan. These are the greatest play in the IRS tax code to begin to accumulate savings.”
There is never a perfect time to begin saving, so Bill recommends encouraging employees to start early to accumulate the greatest capital appreciation possible.“ If they can manage to put aside five percent of every paycheck starting from the age of twenty-five or thirty,” Bill notes,“ by the time they reach fifty-five, chances are they will be well on their way toward a comfortable retirement.”
An annual survey conducted by America’ s Health Insurance Plans( AHIP) shows that enrollment in HSAs with high-deductible health plans totaled approximately 20.2 million individuals as of January 2016, a
HSAs
Offer Employees A Slew Of Benefits
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