In the competitive era, it is very challenging to retain employees and attract top talents as employees only prefer an organization that offers multiple pre-tax benefits apart from the gross pay. Offering Pre-Tax HSA Contributions is the most common and widely used strategy that employers prefer. But it lacks certain aspects. It provides limited choices and tax-saving options.
To address this issue, employers can explore Lumara Health and offer a unique and innovative solution to their employees that combines the benefits of a Section 125 plan and SIMERP. Let’s see in detail what benefits HSA pre-tax contributions offer to the employees and how the Lumara Health plan is different from them.
An Overview of HSA Pre-Tax Contributions
Health savings account (HSA) pre-tax contributions allow individuals with high-deductible health plans to set aside money before taxes for qualified medical expenses. These contributions reduce taxable income, resulting in lower federal, state, and payroll taxes. The funds in an HSA grow tax-free and can be withdrawn tax-free when used for eligible healthcare costs. Unused funds roll over annually and can even be invested, offering long-term savings potential. HSAs provide a triple tax advantage, making them a powerful financial and healthcare planning tool.
Understanding How HSA Pre-Tax Contributions Work
HSA pre-tax contributions work by allowing individuals enrolled in high-deductible health plans to contribute a portion of their income before taxes are applied. These contributions are deducted directly from payroll, reducing taxable income and lowering overall tax liability. The money in the HSA can be used tax-free for qualified medical expenses such as doctor visits, prescriptions, and hospital bills.
Additionally, unused funds roll over year after year and can be invested for future growth. This triple tax advantage—pre-tax contributions, tax-free growth, and tax-free withdrawals- makes HSAs an innovative tool for both healthcare and long-term savings.
Benefits offered by HSA Pre-Tax Contributions to Employees
HSA pre-tax contributions offer employees a range of financial and healthcare benefits, helping them save on taxes while managing medical expenses more effectively and planning for the future. Here are the key benefits included:
- Reduces taxable income
- Tax-free withdrawals for care
- Tax-free interest and growth
- Funds roll over annually
- Long-term healthcare savings
- Covers wide medical expenses
- Portable across job changes
- Investment opportunities available
Benefits not Included in HSA Pre-Tax Contributions
While HSA pre-tax contributions offer many advantages, certain expenses and benefits do not qualify for tax-free coverage. It’s important to understand these exclusions to avoid unexpected costs.
- Over-the-counter items without prescription
- Cosmetic procedures and treatments
- Gym memberships and fitness classes
- Insurance premiums (most types)
- Non-medical personal care items
- Vitamins and dietary supplements
- Childcare or babysitting services
- General wellness or spa treatments
Revolutionizing Payroll Benefits: Meet the Lumara Health Plan
The Lumara Plan is a fully managed, IRS-compliant Section 125 cafeteria plan integrated with a self-insured medical expenses reimbursement plan, designed to streamline pre-tax health benefits administration. It offers automated plan documentation, including personalized plan papers, enrollment forms, required notices, and non-discrimination testing, while continuously updating for regulatory changes. Employers benefit from seamless administration without spreadsheets or paperwork, with compliance oversight built in. The self-insured reimbursement component allows employees to submit eligible healthcare expenses and receive reimbursements from pre-tax payroll deductions under one cohesive program. Employers incur no hidden fees or upfront costs.
Employer and Employee Benefits of Lumara Health Plan
Lumara Health helps employers manage benefit costs while ensuring compliance and improving employee satisfaction. It simplifies benefits administration and offers measurable savings, making it a smart choice for companies of all sizes. Here are the key benefits of Lumara Health:
For Employees:
- Increase take-home pay by around $100 per month
- 24/7 access to telemedicine and virtual care services
- Includes coverage for spouses and dependents
- $0 copays for eligible health services
- Employee Assistance Program (EAP) for mental wellness
- Access to Mayo Clinic wellness programs
- Tools for diet management and stress reduction
- Mental health, addiction recovery, and couples counseling support
For Employers:
- Save up to $600 per W-2 employee annually*
- Reduce overall healthcare costs by 5–10%
- No upfront or hidden administrative fees
- Automated compliance and documentation management
- Enhances employee retention and satisfaction through better benefits
The Bottom Line – Start Saving More with Lumara Health Today
HSA pre-tax contributions remain a smart financial strategy in 2025, helping employees lower their taxable income while saving for qualified medical expenses. These accounts offer triple tax advantages—pre-tax contributions, tax-free growth, and tax-free withdrawals. Employers also benefit from reduced payroll taxes. For businesses seeking a simplified, compliant, and cost-effective way to offer these savings, Lumara Health stands out with its fully managed, IRS-compliant system that boosts employee benefits while reducing administrative burdens and overall healthcare costs.
Unlock the Power of Smart Payroll Deductions!
Book a 10-minute consultation to discover how your business can unlock tax savings and premium employee benefits with Lumara Health.
