Apr 24
Using Your Annual Bonus for Health Insurance
With the introduction of consumer driven health insurance, more and more employees find themselves with high-deductible health insurance plans and a Health Savings Account (HSA) to help offset the additional costs. While that HSA looks pretty good at the beginning of the year, it’ll no doubt be gone long before you’ve run the gamut of your yearly medical expenses.
One interesting proposal that’s floating around suggests that having your annual bonus redirected to the HSA is a win-win for both employer and employee. Taking an annual bonus of $1,000 as an example: if it’s delivered in the traditional fashion at the annual Christmas party, your employer will have had to set aside an additional $100-$200 for payroll taxes and other government requirements. You’ll have to pay income taxes on it, so the $1K bonus becomes six or seven hundred bucks or less, as it is taxed as the highest applicable rate.
Now, suppose that your employer deposited that bonus in your HSA instead. Since it is not considered income, your employer avoids his tax responsibilities linked to a bonus and you get a full $1,000 as part of your “tax advantaged benefits. Your employer’s budgeting requirement for office bonuses is reduced, and your tax obligations disappear.
There’s additional impact to your own budget as well. Since you can elect to funnel your own funds through your HSA, you’re actually leveraging your own contributions. So if your employer is dropping an extra $1K into your loss fund, it frees up dollars for other expenses you might have throughout the year, but which had been previously unfunded. This approach makes things like contact lenses, new glasses or orthodontia a little less intimidating because there’s additional tax free funding in place.
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May 1st, 2007 at 10:14 pm
HSA Health Insurance plans are becomming more popular lately. If you are looking for lower premiums, they might be a good option for you. It’s always important to review the benefits first and consult with an insurance agent.
May 14th, 2007 at 11:16 pm
HSA plans are a nice addition to cover those inevitable things not covered by your health insurance. We use ours frequently, and the funds can even be linked to a designated debit card. Whoever is selling your medical device, or providing your service, they can just charge the debit card and it comes out of your HSA account for the year. Good stuff.
Jerry