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Essential Office Manager - September 2005
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Actual Article (pdf)
Tips to
develop a winning health savings account program
As evidenced by an ongoing
discussion in our online forums, Health Savings Accounts (HSAs) continue
to be a tantalizing prospect for Office Managers to offer employees as a
benefit that can actually cut dealership costs. Essential Office Manager
recently spoke with Paul Zane Pilzer, author of the new book The New
Health Insurance Solution: How to Get Cheaper, Better Coverage Without a
Traditional Employer Plan, about HSAs and other new wrinkles in
healthcare coverage Office Managers can leverage.
The more auto
dealerships learn about HSAs, “the more you will want all your employees
to have [one] with as large a balance as possible,” he said.
Office Managers
are finding HSAs more and more attractive as an option that provides a
win-win: Employees often perceive them as a benefit, even while they cut
your own HR costs versus more traditional insurance offerings. A
DealersEdge forum contributor also suggested asking your insurance or
bank service provider to make a presentation to employees to outline the
real benefits of HSAs.
To help in that
effort, Mr. Pilzer outlined three HSA scenarios each employer should
consider:
The Zero
Percent Employer Contribution Plan
Under this plan, employees redirect their salary to their own HSA via
the employer. “You can set up a Section 125 salary reduction plan at
virtually no cost,” he says. Under it, an employee fills out a request
form stating the amount of salary per pay period, up to $5,250 per year,
to be redirected to an employer contribution to their HSA. “Offering
your employers this option saves $804 (15.3 percent) combined in FICA
and ensures your employees will fully fund their HSA each year.”
Unlike other uses
of a Section 125 plan, the government doesn’t consider these HSA plans
to be an ERISA employee benefit – even with employer matching
contributions. This exempts your company from reporting requirements
associated with ERISA health plans such as COBRA.
The 50
Percent Employer Matching Plan
Under this plan, your company matches HSA contributions up to a certain
point. It doesn’t have to be exactly 50 percent. If your auto dealership
can afford it, Mr. Pilzer strongly advises a Section 125 matching
contribution plan. In this case, your company would match, dollar for
dollar, employee salary redirected HSA contributions up the maximum
$5,250 amount – $2,625 from each side.
The tax benefits
of this are substantial, Mr. Pilzer points out. The employee gets
$5,250, after taxes, in their HSA, but at a cost of only $2,625 to the
employer and $1,567 (after tax) to the employee.
He also preaches
flexibility when it comes to HSAs. Instead of limiting employees to
choose their contribution level once a year or at a special event such
as a birth or marriage, you should let employees change their amount
anytime they like. “The more flexibility you allow your employees, the
more they will contribute to their HSA and the more you will save on
FICA.”
The 100
Percent Employer Match
If you think your company can’t afford to offer
funding 100 percent of an employee’s contribution, Mr. Pilzer invites
you to think again. The employees most likely to take advantage of this
benefit are also the most savvy managers and top producers who receive
regular raises based on performance. It would cost your company $8,391
to give your employees the same $5,250 after- tax benefit they would get
with a $5,250 HSA employer contribution– a savings of $3,141 per year in
FICA and income taxes. “Your sophisticated employees will view this
option as a raise,” Mr. Pilzer said.
To join the
discussion on HSAsand other health insurance issues, go to
www.dealersedge.com. For more information, go to
www.paulzanepilzer.com.
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