Consistently encouraging employees to contribute to a health savings account (HSA) will only go so far. The best way to max out HSA participation rates is to stress its effectiveness as a retirement tool.
Here’s one thing many employees don’t know about HSAs: The funds left in them are not lost, they continue to grow.
The best way to relay that message to employees: Tell them HSAs work just like a 401(k), but with one big advantage — the tax-deferred funds that are put into the HSA can be withdrawn tax free when used to pay for qualified healthcare expenses.
And if a withdraw is made for another reason — say to pay for food, housing or a vacation — the money is taxed the same as a 401(k) withdrawal.
Now if employees wanted to use money from a 401(k) or IRA to pay for medical expenses, that money will be taxed as income by the IRS.
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