In the workplace, benefits are often used to entice top recruits and retain quality workers. Many employers provide benefits like health insurance coverage, but some also offer employer-funded accounts. These are accounts that the employer pays into on behalf of the employee. A health savings account (HSA) is an example of an employer-funded account.
How Does Funding Work?
Employer-funded accounts may include contributions from both the employee and the employer, or they may be funded entirely by an employer. A health insurance plan, for example, may be funded entirely by an employer, meaning the employer pays the entire cost for the account. An HSA, on the other hand, may receive funds from both the employer and the employee, and funds from both are commingled and are available for the employee to use.
When an employer contributes to an employee’s account, there may be limitations imposed by state or federal laws. For example, health savings account administration rules only allow contributions up to a certain amount by the employee and the employer. When an employer contributes funds to an employee’s HSA, the health savings account administration team must monitor the total amount of contributions to remain below the legal threshold. For health savings account administration, visit this website.
Matching Contributions
Some employers fund employee accounts fully, but others will match employee contributions instead. In a matching scheme, the employer may set a percentage limit. For example, an employer may agree to match employee contributions up to 6%. This means that the employer will match employee contributions up to 6%, but beyond that 6%, only the employee contributions will fund the account. This is advantageous for workers since it equates to free money from an employer.
Taking Money Out of an Employer-Funded Account
Some employer-funded accounts allow employees to withdraw money, but most will require the employee to become vested. In most cases, having a vested interest in an account requires that employees complete certain steps first. To become vested, an employee may have to work for an employer for a certain length of time or contribute a certain amount of money to an account. This stops employees from taking advantage of employers by simply withdrawing funds from an account and then quitting the job.
Read a similar article about HSA eligible expenses here at this page.
