Employees covered by high-deductible health plans (HDHPs) were given some extra time this year. Usually, HSA contributions for HDHPs are due by April 15th – along with the federal income tax due date.
For 2020, with tax day pushed back to July 15th, the HSA contributions deadline has also been moved to July. If your benefits offerings include HDHPs, it’s a good idea to communicate with your employees to be sure they’re aware of this approaching deadline.
Because HSAs can feel complicated to users, any communication is likely to spark some questions. Here are a few talking points to share with your employees regarding HSA contributions.
HSA contributions reduce taxable income, and build up savings for future healthcare needs.
If employees wish to contribute more than their payroll deductions, they can do so now through July 15, 2020. While they’re post-tax, unlike pre-tax payroll deductions, they still reduce total taxable income.
HSAs are portable.
This means that they belong to the covered individual regardless of employment status. Even if employees are furloughed, temporarily laid-off, or experience any other change in work status, their HSA remains in their custody.
It’s important to note that contributions to HSAs do not expire and funds roll over indefinitely, regardless of employment status. However, HSAs which are allowed to sit dormant, without contributions or use, can end up becoming inactive. To avoid losing access to funds or being hit with fees, employees need to be aware of how their plan classifies inactive plans. More on that below.
Employees Can Keep HSAs with a Furlough, Leave of Absence or COBRA.
Employees who have been furloughed or placed on leave due to COVID-19 work stoppages might have questions about their HSA contributions and the active/inactive status of their accounts. While they won’t lose use of their funds, they can go inactive.
The length of time an unused HSA account remains active depends on the plan. Some plans are built with a ticking clock from when contributions stop to when they become inactive. Others may require an administrative fee to keep them active when contributions aren’t being made. Employees should be made aware of potentially inactive HSAs before they go on furlough or leave so that they can take appropriate steps to keep the HSA active until they return to work and regular payroll deductions can resume.
When it comes to HSA contributions during furloughs and leaves, HDHPs still allow for contributions by both employers and employees. Employer contributions are likely mentioned in your business’s Leave of Absence policy. Employees who are not receiving paychecks can still make post-tax contributions as they see fit.
If employees are on COBRA coverage, they can still make post-tax contributions to their HSA as long as they are still enrolled in their high-deductible health plan. If the employee is brought back to work, they can roll their old HSA into a new account with the resumption of health coverage.
HSAs offer considerable opportunity for employees to take charge of their healthcare savings, but they come with a lot of questions, especially in light of 2020’s unprecedented events. Keeping your employees apprised of important HSA deadlines and opportunities to keep their HSA accounts busy and working for them will help everyone weather the storm more safely.
Do you need help communicating with your workforce? Our communication tools can help! Contact WBD to learn more about the services we offer the benefits administration workplace.