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If you qualify for a health savings account (HSA) through an employer, there is a chance they may help get you started with contributions. It’s the ideal situation. The more contributions your employer dumps into your HSA account each year, the better.

You can then use that money to pay out-of-pocket healthcare expenses. But not all benefit packages are created equal. So, it is nice to know how your employer’s contribution stacks up against others.

Here is how Max’s employer contributions look for 2021:

Comparing your situation to mine is one thing, but I am a small sample size. I would prefer to look at a larger group of workers.

Thankfully, my friends over at the Kaiser Family Foundation collect data on this type of thing every year. Their employer health benefits survey is extremely comprehensive and a great source to turn to for information like this.

Health Savings Account Employer Contribution Rules

The Internal Revenue Service (IRS) allows the employer to make contributions to health savings accounts.

Publication 969 specifically says a health savings account can receive contributions from an eligible individual or any other person, including the employer, on behalf of the eligible individual.

The language in this paragraph certainly does not force the employer to make contributions, but it definitely gives them the option. This section of Publication 969 could be a good place to point your employer if you are lobbying for them to start making contributions.  

The employer contribution is not included as income. Therefore, you cannot deduct that amount from taxable income. Additionally, these contributions are included when figuring out our annual contribution limits.

Employers Who Don’t Make Contributions

Let’s start with the bad news. Many employers don’t play nice in the health savings account sandbox. They go as far as providing a risky high deductible health plan with a health savings account option, but they stop there. They do not make any contributions to the health savings account for their workers.

The fact is this is pretty common. Over 50% of employers who offer self-only or family HDHP coverage with a health savings account option do not make any contributions to the HSA that their worker establishes.

Generally, larger firms are more likely to contribute to the HSA than smaller firms. I work for a large company.

Unfortunately, this leaves about 25% of workers covered under a qualified HSA through their employer without any assistance from their company in building up a balance.

I am purposely bolding “employers” and “workers” above for clarity and context.

That 25% with $0.00 in contributions goes for both self-only and family coverage.

Average Employer Contribution 

Now, for those lucky enough to get an employer contribution, what does the average look like?

We have to be careful when we talk about averages, so pay attention to the details here. Things get missed when people quickly breeze through survey data.

The average employer contribution has been somewhat flat over the last decade. Among all workers enrolled in qualified HDHP with an HSA option in 2020, the average annual employer contribution was $550 for workers enrolled in self-only coverage. For family coverage, the average came in at $1,018. See the red boxes below.

Click on this figure to make it bigger.

Keep in mind that the average includes employers who contribute $0.00. I think this is an important thing to distinguish and I feel compelled to call this out. Suppose we back out those employers and only include the ones who make contributions, the average increases. The average is $741 for self-only coverage and $1,389 for family coverage of employers who actually make an annual contribution. See the blue boxes above.

Common Annual Contribution Amounts

The following numbers are pulled directly from figure 8.17 (self-only) and 8.18 (family) above.

For self-only coverage, the contribution range of $400 – $799 makes up the largest percentage (33%) of covered workers in 2020. For the family coverage group, the contribution range of $1 – $999 makes up the largest percentage of employer contributions (33%) of covered workers.

My employer lands in this 33% group for both self-only and family coverage with a $600 employer contribution for both types of coverage.

I am yet to personally come across an employer who “matches” the employee contribution, but I like the idea. It sounds a lot like a retirement match. Evidently, 5% of workers are lucky enough to have this type of benefit. That goes for both self-only and family coverage of covered workers at all firms.

Max’s Employer Contributions

As I mentioned, it just so happens my employer made our 2021 contribution last week. They do this in early January each year in one $600 lump sum. The Max Out of Pocket crew is on a family high deductible health plan with an HSA option.

This is my fifth year in a row with a $600 contribution from this employer.

$600 X 5 Years = $3,000

My employer comes in about $800 lower than the average employer who actually makes a contribution.

My previous employer put in about $1,400 into my account once we became a family. They also spread out their contributions over 26 pay-periods instead of doing it as one lump sum. Although $1,400 is more than twice what I get at my current employer, my insurance premiums are much lower now than they were at my previous employer. My current plan is valued at $22,450 based on premiums alone.

Here is a brief history of how Max’s employer HSA contributions have stacked up over the years:

• 2009 Self-Only: $702
• 2010 Self-Only: $675
• 2011 Self-Only: $675
• 2012 Self-Only: $675
• 2013 Self-Only: $729
• 2014 Self-Only: $702
• 2015 Self-Only: $702
• 2016 Family: 1,404
• 2017 Family: $600
• 2018 Family: $600
• 2019 Family: $600
• 2020 Family: $600
• 2021 Family: $600

Total: $9,264

Final Thoughts

Although this is good information to know and understand, it is just one data point. Premiums paid directly by the employee and out-of-pocket cost structure matter. These items must also be reviewed. For example, if an employer makes $0.00 in health savings account contributions but covers the insurance premiums in full, you probably still have a solid deal.

I generally recommend adding HSA contributions to the premiums paid by the employer when comparing benefit packages from one employer to another. Or a better approach might be to reduce your projected out-of-pocket costs, like a deductible or max out-of-pocket, by the employer’s HSA contribution. This will help even things out when comparing plans.

It’s worth taking the time to understand employer HSA contributions. It is part of your benefits package and can really add up over the years. Who knows, perhaps you will be asked to join a committee someday to pick your employer’s HSA vendor. Just maybe, this subject will come up.

Since 2009, the Max Out of Pocket crew has received exactly $9,264 in employer contributions to my health savings accounts. That’s a huge chunk of change and has easily covered all of our healthcare expenses over the years.

How much does your employer contribute to your health savings account?

I am not a tax professional and this is not a recommendation to open a health savings account or enroll in a high-deductible health plan.

Tags: EMPLOYER CONTRIBUTIONSFAMILYHEALTH SAVINGS ACCOUNTSHSAKAISER FAMILY FOUNDATIONKFF