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Health Savings Accounts for Independent Insurance Agents: What You Need To Know

If you are an independent insurance agent, you have a lot to think about. If you are employed by another company, the company may give you health insurance. Unfortunately, if you are a small business owner, you are responsible for finding your own health insurance. Then, you must make sure you set aside money to not only cover the cost of your insurance premiums but also pay out-of-pocket medical expenses. That is where a health savings account, usually shortened to HSA, can be helpful.

As an independent insurance agent, unexpected expenses are something that you are used to. That is why you must set aside money for a potential emergency, which is where a health savings account comes in handy. What do you need to know about health savings accounts, and what are some of the reasons why you should have one?


How a Health Savings Account Works

Before diving into the benefits of an HSA, you need to understand how they work. A health savings account allows your employees to set aside pre-tax money to pay for certain medical expenses. Of course, you can set one up for yourself as well. The goal of a health savings account is to reduce the cost of health insurance on the part of both employers and employees. If you want to attract solid employees, you should provide them with health insurance. This is another expense your independent insurance agency may have to absorb and having an HSA can make the process easier.

With an HSA, your employees (and yourself) can designate a certain amount of money to come out of their pay every check. Then, this money goes into the HSA, and they don’t have to pay taxes on it. Then, you and your employees can use the money in your respective HSAs to pay for qualified medical expenses. As long as the money is used to cover qualified medical expenses, that money is not taxed. If the money is not used, it rolls over to the next year, and it might even earn interest, depending on where the HSA is stored.


What Are the Top Benefits of an HSA for an Independent Insurance Agent?

Clearly, an HSA can be a major tool you can use to cover medical expenses. What are some of the reasons why you should consider setting up a health savings account through your insurance agency?


The Money Is Set Aside Pre-Tax

One of the major benefits of an HSA is that the money is set aside pre-tax. You can let your employees know that they can contribute money to an HSA without having to worry about paying taxes on it. Therefore, having an HSA could be a significant tax deduction, and it might allow your employees to access a larger tax refund at the end of the year. If you are looking for a way to reduce your tax liability, a health savings account could be one of the best ways to do so.


Greater Flexibility To Decide How Much Money To Set Aside

Another major benefit of an HSA is that there is a tremendous amount of flexibility. Your employees get to decide how much money they set aside in the health savings account from every paycheck. If you have employees who are relatively healthy and do not have to go to the doctor very much, they may decide not to put away a lot of money. On the other hand, if you have employees with a lot of medical expenses, access to a health savings account could help them save a significant amount of money on their medical bills.


Attract Talented Employees

There is a saying that it is hard to find good help these days. If that is something you are struggling with, you might want to consider offering an HSA as a way to attract talented employees. Everyone is looking for a way to save money, particularly when it comes to taxes. If you let your employees know that they have access to an HSA, they might be more inclined to sign a contract with your company. Furthermore, the money rolls over every year, and they can take the HSA with them when they change jobs. This type of flexibility is not found in other medical savings options.


Add a Beneficiary

With a health savings account, you also have the option to add a beneficiary. If the beneficiary is your spouse, you might be able to use the money in the HSA to cover their medical expenses as well. Importantly, if the money stays in the account until you turn 65, you can use the money for non-medical purposes. You don’t have to worry about paying a penalty, but you will have to pay income tax on the funds you withdraw. You may want to talk to an accountant to learn more about issues related to beneficiaries and retirement.


Save on Payroll Taxes

As an employer, you can save a significant amount of money on your payroll taxes. You are probably tired of paying payroll tax, and one of the ways you can reduce your payroll tax liability is to offer an HSA. If your employees decide to take some of their pay and put it in an HSA, they don’t have to pay income tax on it as long as they use it for medical purposes, and you don’t have to pay payroll tax on the portion of their pay they put in the HSA.


Earn Interest

Finally, if you decide to offer an HSA, the money in the HSA could earn interest. Typically, the interest changes with the market, so the percentage you earn can vary from time to time. As you figure out where you want to set up the HSA for your insurance agency, you should take a look at the interest rates different banks offer. You might be able to generate some additional money for the HSA by banking with the right financial institution.

Clearly, there are a lot of benefits you will enjoy if you decide to set up an HSA. You need to figure out how you can structure the HSA to meet the needs of your employees.


Reach Out To American Agents Alliance for More Resources

As an insurance agent, you are a small business owner, and you need to think carefully about how you can set your business up for success. That means keeping your employee’s happy while also minimizing potential tax liability. One option is to use a health savings account. You and your employees can open a health savings account to set aside money that can be used to cover qualified medical expenses. This account could help you and your employees reduce your potential tax liability.

There are plenty of resources available to help your business be successful. We are the American Agents Alliance, and we have a variety of resources available to help you plan for current challenges, keep your employees happy, and manage your finances accordingly. If you would like to learn more about how we can help your agency, contact us today.

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