Health Savings Accounts Work For Small Businesses

Health savings accounts are well known for making medical expenses tax deductible and for helping people create savings for retirement with tax-free interest, similar to an IRA. Increasingly, health savings accounts are becoming more popular with both employers and employees.

Here’s what providing your employees with health savings account (HSA) benefits can mean for your business and your employees:

Low Administrative Costs Health savings accounts help your business avoid costly administrative expenses because your employees basically administer their own accounts. They can manage how their funds are invested and decide when to make withdrawals. They can even make personal deposits into their HSA.

Your business will also have few contribution requirements to meet. You can deposit a lump sum just one time, or make multiple deposits, when most convenient depending on cash flow.

Benefits For Employees

Offering HSA benefits is a low-cost way to make your company more attractive and can help you retain employees. That helps you save on training costs, can improve customer service, and typically increases sales revenue.

Your employees’ HSA earnings are not taxable as long as the funds remain in their accounts, and their balances can grow faster by earning tax-free interest. There’s an incentive to hold onto those retirement funds, which can motivate employees to protect their health so they don’t have to withdraw money to pay for health care. That, in turn, can help reduce sick days and increase productivity.

HSA funds are also attractive to employees because the employees own their accounts. These portable accounts are theirs to keep if they lose a job, change jobs or retire early. Any account funds that aren’t withdrawn simply roll over at the end of each year to continue building a “nest egg.”

HSA Contribution Requirements

While there’s no minimum contribution requirement, there are maximum contribution limits. You must stay below the legal annual contribution limit, which depends on the year in question.

In addition, employer contributions to different employee health savings accounts must be “comparable.” That means deposits must be in the same dollar amount or the same percentage of employees’ deductibles for those employees with the same category of coverage. Typically, coverage categories are either going to be “self-only” for individuals or “family.”

Employer contributions can vary depending on whether the employee’s status is full-time or part-time. When employees are covered by a collective bargaining agreement that includes health benefits, comparability rules don’t apply.

Requirements for Partnerships, Section 125 Plans And S Corps

What if your company offers benefits through a Section 125 plan? Such salary reduction or cafeteria plans must comply with different rules. With Section 125 plans, contributions from either the employer or the employee have to follow “non-discrimination” rules. That means the employer has to be sure that contributions don’t favor employees with higher compensations.

There are also restrictions on HSA contributions with respect to owners and shareholders of S corps. Owners and officers who have more than a two-percent share of a Subchapter S corporation may not make pre-tax contributions to an HSA through the company by salary reduction.

Any contribution made to their HSA from the corporation is considered a taxable form of income. They may, however, deposit personal contributions into their HSA and take an “above-the-line” deduction on their personal income taxes.

Partners in an LLC or partnership have to comply with similar restrictions. They cannot make pre-tax contributions to their HSA through the partnership by salary reduction. Like the owners and officers, partners may deposit personal funds into their HSA and take an “above-the-line” deduction on their personal income taxes.

Beginning a business by yourself is always something that requires an immense amount of hard work, thought and dedication. There are a whole lot of things you should be able to look out for when you are on the verge of starting a small business. The foundation has to be right, so that the business sets off on the right foot. There are some steps that you have to take before starting a small business, and this article will enumerate the basic steps that you have to take prior to taking the plunge. If you get these things done you will find that the going gets a lot smoother and the running of the business is not blighted by unexpected occurrences, by that I mean, you are prepared.

Step one

Planning A detailed plan for your business

Planning is the first step that you have to take, and when planning is done, you have a well prepared guide line for the running of the business right in front of you that will be immensely helpful. Planning has to be extremely minute and detailed, and this helps in attaining clarity of thought that will free up your intellect in making decisions. The goals of the company should be laid out in detail, and every aspect of the business should be outlined. When a comprehensive business plan is prepared, you see a lot of things going your way, like easier funding from conventional sources like banks, as investors like to see a well planned business idea. The business plan has to include items like cost projections, management, earnings expectations, goals and other aspects.

Step two

Get the Legality of the issues in order

The legal issues of a business are among the aspects that require meticulous attention prior to starting a small business. There are myriad aspects like licenses, permits and other red tape issues. Consulting a lawyer is also an excellent idea and investment too.

Step three

Pax with Tax

Personal Taxes do not even come close to business taxes in complexity, and laziness in dealing with these will be extremely harmful for your business, there is also a chance of you landing in jail. Things like having an employer identification number have to be handled. Handling the pay roll will also be a task. Taking the help of professionals like accountants will be useful in this aspect.

Step four

Plan on Marketing Yourself

Marketing is crucial for a business. If you do not have a definite plan on marketing, there will be no chance of people even knowing you exist. There is a whole range of range of options, but it is certainly no easy task, as the presence of so many options makes sure that it is also extremely easy for you to go astray. Thus a good plan for marketing should be made, and stuck to. The market that you are targeting has to be identified, and information on your product or service should reach them, which is where marketing comes in.

Step five

Work Hard and Smart

How ever hectic your job may have been, the fact is that it is no match for the hours you will have to put in when starting out on your own. There are a whole range pf things that have to be dealt with. Starting a business may have involved a lot of work on your end, but it is necessary to remember that this is just the beginning, not the end.