Having a Pre-Tax Health Savings accounts is a must for any employee. It enables them to save a portion of their salary for sudden and eligible medical expenses. Furthermore, it offers lucrative tax benefits that employee can avail to reduce their taxable income.
For enhanced and advanced pre-tax health savings account, employee can opt for a Lumara Plan. It offer the benefit of pre-tax deductions with SIMERP. Let’s explore the pre-tax health savings account and the Lumara Plan.
What are Pre-Tax Health Savings Accounts
Pre-tax health savings accounts (HSAs) are tax-advantaged savings accounts designed to help individuals with high-deductible health plans (HDHPs) pay for qualified medical expenses. Contributions to an HSA reduce the taxable income of the employees. The funds in the account grow tax-free, and withdrawals for eligible healthcare expenses are also tax-free.
Pre-tax health savings accounts are portable, meaning the account stays with the individual even if they change jobs or retire. Unused funds roll over each year, allowing the account to grow over time. HSAs offer a triple tax benefit: tax-deductible contributions, tax-free growth, and tax-free withdrawals, making them a powerful tool for healthcare savings.
Benefits of Pre-Tax Health Savings Accounts
Pre-tax health savings accounts (HSAs) offer several financial and healthcare-related advantages for individuals with high-deductible health plans. These accounts not only offer payroll pre-tax deductions but also provide long-term savings potential, flexibility, and control over healthcare spending. Here are the key benefits of pre-tax health savings accounts:
- Tax Savings: Contributions are made with pre-tax dollars, reducing your overall taxable income for the year and lowering your tax burden.
- Tax-Free Growth: Interest and investment earnings within an HSA grow tax-free, helping you build more value over time without additional tax liability.
- Tax-Free Withdrawals: Funds can be withdrawn tax-free when used for qualified medical expenses, such as prescriptions, doctor visits, and hospital stays.
- Rollover of Funds: Unlike flexible spending accounts (FSAs), unused HSA funds roll over annually, allowing you to accumulate savings for future medical costs.
- Long-Term Savings Tool: HSA funds can be invested, offering the potential for long-term growth similar to retirement accounts, which can be used for future healthcare needs.
- Retirement Flexibility: After age 65, you can withdraw HSA funds for non-medical expenses without penalty (though regular income tax applies), adding flexibility in retirement planning.
Seamless Integration of Pre-Tax Health Saving Accounts into Your Payroll System
Lumara Plan: An Upgraded Pre-Tax Health Savings Account
The Lumara Plan is an enhanced pre-tax health savings solution that integrates a Section 125 Cafeteria Plan with a Self-Insured Medical Expenses Reimbursement Plan (SIMERP). This comprehensive structure allows employees to allocate pre-tax earnings toward a wide array of healthcare expenses, including medical, dental, vision, and dependent care costs.
Notably, the plan offers zero out-of-pocket expenses for preventive care services, ensuring accessible and cost-effective healthcare. The Lumara Plan’s seamless integration and automatic enrollment features make it a strategic choice for businesses aiming to enhance employee benefits while achieving tax savings.
Benefits of Lumara for Employers
The Lumara Plan offers employers a cost-effective way to enhance employee benefits while generating significant tax savings. Here are the key benefits of Lumara Plan for employers:
- Save on Payroll Taxes: Employers can save about $600 to $700 per W‑2 employee every year by lowering their FICA tax payments. This helps reduce total payroll expenses.
- No Cost to Start: The Lumara Plan works with your existing payroll system and doesn’t cost anything to implement. It’s a simple way to improve benefits without spending more.
- Better Employee Retention: When employees get free preventive care and more support, they feel valued. This helps employers keep good workers longer and lowers turnover.
- Fully Compliant and Easy to Manage: The plan is 100% IRS-compliant and fully managed by Lumara, so employers don’t have to worry about paperwork, legal rules, or extra admin work.
Benefits of Lumara for Employees
The Lumara Plan offers employees an upgraded health savings experience by combining tax advantages with enhanced healthcare benefits. Here are the key benefits of Lumara Plan for employees:
- Higher Take-Home Pay: Employees use pre-tax money for eligible expenses. This lowers their taxable income and gives them more money in their paychecks each month, without changing their salary.
- No Cost for Preventive Care: The plan covers 100% of preventive services, like health check-ups and screenings. That means employees don’t pay anything out of pocket for these visits.
- Tax-Free Reimbursements for Medical Costs: Employees get tax-free reimbursement for qualified medical expenses. This helps them spend less on healthcare and reduces financial stress.
- Family Members Are Included: The plan also covers spouses and dependents, so employees and their families can save more together and get the care they need.
Conclusion: A Smarter Approach to Payroll and Healthcare Savings
Integrating pre-tax health savings accounts (HSAs) into your payroll system is a strategic move that benefits both employers and employees by reducing tax liabilities and enhancing healthcare affordability. Automating HSA contributions ensures accuracy, compliance, and ease of administration.
Among the available options, the Lumara Plan stands out for its seamless integration, zero-cost setup, and enhanced benefits like tax-free reimbursements and preventive care coverage with no out-of-pocket expenses.
