The IRS has provided several tax advantages for those participating in different type of health insurance plans. These tax advantages are easy to use and implement if explained correctly and tailored to each company's individual needs. Also, savings from these tax advantages can be substantial for each company.
A Flexible Spending Account, or FSA, allows participants to withdraw funds from a paycheck prior to taxation. The participant determines the amount deducted from each paycheck, and these funds are designated for medical related expenses. Unlike other health savings-type accounts, an FSA must be used within a year or the participant loses the funds. Some advantages include childcare, toll roads, and medical expenses.
IRS information on FSA: http://www.irs.gov/publications/p969/ar02.html
A health reimbursement arrangement, HRA, allows employers to contribute to the medical expenses of employees.
Funds can be spent or saved in the account from year to year. These funds may go towards paying medical expenses not covered by the employee's health insurance plan, and out of pocket medical expenses, such as deductibles, co-pays, and prescription drug costs. The employer generates a list of eligible expenses for employees to follow.
IRS information on HRA: http://www.irs.gov/publications/p969/ar02.html
A health savings account (HSA) allows employees to put aside money for health related expenses. The HSA contributions are taken directly from the employee's paycheck, before taxes. This helps workers save up money for paying for copayments, deductibles, and non-covered medical expenses. It also helps the employee save money by avoiding taxes on any funds set aside for the HSA.
Employees and employers can contribute to the balance of the HSA.
This fund continues to accumulate interest and capital gains until the employee reaches the age of 65. Once the employee reaches retirement age, he has the option to continue the fund for medical expenses (tax free) or withdraw the amount for non-medical expenses and pay the current tax rate on the funds.
IRS information on HSA: http://www.irs.gov/publications/p969/ar02.html
A Premium Only Plan helps both the employer and the employee by reducing the amount of income tax liability for each fiscal year. The employee is able to use funds from the tax free account to pay for group health plan insurance premiums, and the payroll tax, social security tax, and Medicare taxes are greatly reduced for the employer.
Consult a UBC broker for details on your eligibility for one of these money-saving health insurance related tax advantages.
IRS publication 969; current information on tax advantages: http://www.irs.gov/publications/p969/ar02.html