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If you want to empower your employees to take control of their health and financial future while potentially lowering overall healthcare costs, look no further than a health savings account (HSA) match. As an employer, you are likely already familiar with the cost-saving benefits of an HSA paired with an HSA-qualified health plan. You may even offer employer matching through your organization's 401(k) program. But, when it comes to offering an employer match with an HSA, it's a strategy that may get overlooked.
While some HSA match strategies may drive more engagement compared to others, any match can be a powerful employee incentive. Moreover, it's worth noting that employer contributions do count toward the annual maximum contribution limits established by the Internal Revenue Service. When you're ready to get started with a match, here are five HSA contribution strategies to consider.
1. No employer contribution
If you don't currently offer an employer match, this option may look familiar. We'll start with this as our base option. There are many reasons an organization chooses not to offer an employer contribution-a tight budget is usually at the top of the list. While not offering any HSA incentives does save money upfront, there are significant downsides to both employer and employee.
For instance, without employer contributions, your employees are less likely to contribute to their HSAs themselves. And if your HSA-qualified plan is less enticing for employees, they may be more likely to opt for a more traditional health plan option instead, which can increase your organization's overall healthcare costs. The result is a small amount of money saved upfront, but potentially lackluster HSA engagement long-term.
2. Seed only
Seed incentives are the most common type of employer contribution. With this option, you offer a set dollar amount contributed to your employees' HSA accounts. You can make seed contributions in the following ways:
- A lump-sum amount
- Smaller contributions throughout the year
- A combination of the two methods (one initial payment and several installments each pay period)
Seed options are a great way to incentivize HSA use because they directly help employees with their healthcare costs. However, some organizations may get the short end of the stick, inadvertently subsidizing plans, such as their PPO plans, by paying for a greater percentage of PPO premiums.
To balance this, offer an HSA-qualified plan with lower premiums than your traditional plan so that the available choices are both cost-neutral. An example of this is offering a PPO plan with a $300 monthly premium versus an HSA-qualified plan with a $150 monthly premium and $150 monthly employer seed.
To ensure your HSA-qualified plan is even more appealing to your employees compared to the low-deductible plan of a PPO, you can opt to spend more money upfront as a way to compensate for the additional cost.
3. Match only
With a match-only incentive, you can encourage HSA adoption by offering your people free money. Similar to a 401(k) contribution plan, a match-only plan is where you offer a match each time your employee contributes to their HSA. With this option, you can commit to a certain dollar amount or percentage up to a pre-set threshold.
For instance, if you offer a match by percentage, you'd contribute a percentage of the amount that your employees contribute (example: a 50 percent match of employee contributions up to $500 maximum). If you offer a dollar-for-dollar match, you'd contribute at the same rate as your employee (example: $1 for every $1 an employee contributes, up to $500).
4. Seed and match
You may be wondering if you can combine seed and match options, and you certainly can. With seed and match, you can provide seed money while also matching additional funds your employee contributes. Organizations that choose this option typically offer a lump sum to start, then contribute additional funds each pay period to match employee contributions. This best-of-both-worlds approach encourages employees to use their HSA while maximizing contributions.
5. Combine seed, match, and wellness
If you offer a wellness program to your employees, combine it with your HSA program by offering wellness contribution incentives. In addition to seed and match funds, encourage healthy habits by offering additional contributions when employees reach certain wellness milestones. Some examples of milestones may include:
- $50 for reaching nightly sleep goals
- $150 for completing an annual physical
- $100 for exercising regularly
By combining programs, you can help employees develop healthy habits that could ultimately drive down healthcare costs.
A match made in HSA Heaven
Employer matching can be a powerful tool to encourage both HSA adoption and a healthy lifestyle. But it can be a challenge to create the right HSA match program for your organization. As you weigh your options, lean on our 20 years of experience. Reach out to us at 866.855.8908 and we'll help you find the best strategy available.
The examples used are for illustrative purposes only.
HealthEquity does not provide legal, tax, financial or medical advice. Always consult a professional when making life-changing decisions.
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