Two Plans Are Better Than One

In recent years, with the introduction of Qualified High-Deductible Health Plans (QHDHPs) and Health Savings Accounts (HSAs), business owners have more tax-saving options in health insurance. While you may need to offer employees a traditional health plan with lower deductibles as an employee retention strategy, you may also benefit from the tax-free accumulation of funds in a health savings account. So, how can you get the best of both worlds?

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In recent years, with the introduction of Qualified High-Deductible Health Plans (QHDHPs) and Health Savings Accounts (HSAs), business owners have more tax-saving options in health insurance. While you may need to offer employees a traditional health plan with lower deductibles as an employee retention strategy, you may also benefit from the tax-free accumulation of funds in a health savings account. So, how can you get the best of both worlds?One way is to keep a traditional plan and use a class system to take advantage of an HSA account. You can set up two separate plans—one traditional plan, and one QHDHP for you and your highly compensated, key employees that would fit into this class.

You and those key employees could contribute as much as $2,850 to an HSA for an individual and as much as $5,650 for a family in 2007, capped with a maximum of the deductible amount in your QHDHP. This money grows tax-free and can be withdrawn tax-free to pay out-of-pocket medical expenses.
Unspent balances in health savings accounts can roll over from year to year and continue to grow tax-deferred. After age 65, you can use the money for any purpose without paying a penalty. In essence, the QHDHP can act as a supplement to your retirement accounts—a great opportunity to accumulate additional monies for post-retirement health insurance or long-term care expenses. These dual plans can be administrated fairly easily and provide a tax break for you.

You can offer a QHDHP for all employees if they are willing to exchange higher out-of-pocket expenses now for possible tax-free future benefits. If you have questions on how to classify employees who want to be included in the plan, contact your tax or legal advisor, or ask your health carrier.

PMPA recommends Federated Insurance for the following products and services:
• Group health and dental
• Property/casualty and workers compensation
• Financial protection services (individual life and disability)
• Deferred compensation
• Business succession and estate planning
• Key employee private bonus plans

Although not all programs are offered in all states, Federated’s custom solutions can help you manage your risk and control your premiums. PMPA members are urged to contact Nate Oland, PMPA’s National Account Executive at Federated Insurance at nsoland@fedins.com or by phone at (800) 533-0472, ext. 8935 for further information.