What are the advantages of an HSA?

Employer Advantages:

  1. Employers do not have to pay payroll taxes on employee HSA contributions, typically 7.65 percent of the amounts paid plus state unemployment taxes (where applicable).
  2. Employer HSA contributions are tax deductible by the employer as an employee benefit, meaning the employer receives a business deduction as a normal business expense.  
Individual (Employee) advantages:
  1. Triple tax advantage:
    • Contributions both the employer and employee make to the HSA can be tax-free for the employee.
    • Interest and investment earnings on an employee’s HSA balance are not taxed.
    • Withdrawals used to pay for qualified medical expenses are not taxed.
  2. The HSA allows individuals to save for current and future medical expenses, meaning the funds are held in the account year over year and are available when needed for current qualified medical expenses or future expenses.
  3. The HDHP premiums are usually lower, and savings can be used to fund the HSA.

Note:Neither UMB Bank, n.a., nor its parent, subsidiaries, or affiliates are engaged in rendering tax or legal advice. All mention of taxes is made in reference to federal tax law. States can choose to follow the federal tax-treatment guidelines for HSAs or establish their own; some states tax HSA contributions. Please check with each state’s tax laws to determine the tax treatment of HSA contributions or consult your tax adviser. Additional federal and state forms may be required