Benefits of HSA Cafeteria Plans
There are numerous benefits of cafeteria plans that not only make your life easier and saving money. Additionally of all of the advantages of savings in an HSA, here are some additional benefits that are contributing via a Cafeteria Plan provides:
- You pay fewer taxes. You read this right; Cafeteria Plans reduce the amount of taxes you pay. Because payroll tax is not the only tax, you pay each paycheck. Also, you pay into other programs such as Medicare, Social Security, and any state taxes taken from your earnings. When filing you Form 8889 as part of your tax return, you only be credited for the paid income tax. The other taxes stay with Uncle Sam. Using a cafeteria plan allows you to make these contributions before all these payroll taxes hit it, allowing you to keep a larger slice of your earnings.
- Disciplined savings. One of the hardest things about saving is putting aside the money to save. There is always something that comes up or something tempting you as a “more fun” use of the funds. Saving via a Cafeteria Plan eliminates this because you automate your savings plan, and the money is taken pre-tax. It never even hits your checking account as it goes straight to the HSA, preventing you from spending it and making sure you make your contribution.
- Easier transactions. I never had the luxury of a cafeteria plan, so each month, I had to initiate a transfer to my bank to contribute. Having this taken care of reduces the amount of work you have to do and transfers you make with your money.
When presented with the option for contributing to an HSA via cafeteria plan, you should consider it, based on the benefits above.