How to Give Every Team Member a Tax-Free 'Raise'
There's no better deal around than a Health Savings Account.
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The next time you talk benefits with your employees, tell them you have an amazing deal for them: tax-free income. Yes, tax-free -- not tax-deferred.
It's a HSA or Health Savings Account. Employees put money into the account pre-tax. They take it out -- for qualified medical expenses -- tax-free. They can even let it sit for years, growing as an investment, and then spend it as they wish, as long as they have had an equal amount of unclaimed medical expenses over time.
Let me be emphatic: I know of no other way for an employer, small or large, to give employees tax-free income. None.
The only catch is that to qualify employees have to choose a high-deductible health insurance plan in order to contribute to an HSA. And the annual contributions for them are capped at about $7,000 for a family and about half that for an individual.
Even so, considering income rates for most employees are 15 to 34 percent, this is a heck of nice raise for them each year. It's a great benefit, and a no-brainer.
Related: Why Educating Employees About Retirement Plans Is Critical