Are Health Savings Accounts an Option for Credit Union Employees?

In 2004, health care costs rose 7.5 percent. Still outpacing inflation and with little hope for the future, many employers are looking for cost cutting solutions.


Mercer’s National Survey of Employer Sponsored Health Plans reported that the average total cost of health benefits per active employee rose 7.5 percent to $6,679 in 2004 for all medical and dental plans offered. This amount includes both employer and employee premium contributions, but does not include employee out-of-pocket expenses. With no end in sight to the annual increases, many employers, including credit unions, are looking for cost cutting solutions.

What  Is an HSA?

One solution many are exploring is offering a health savings account (HSA) to employees. HSAs are offered with high deductible health plans (HDHP) and give individuals the ability to deposit up to the deductible amount in their account annually, then utilize these funds on a tax-free basis for qualified medical expenses. Deposits can be made by the individual, his employer or even the insurer in some cases, and are not considered income for federal tax purposes.

Any funds remaining at the end of the year are rolled over (no "use it or lose it" restriction) along with any interest earned for use in later years. The accounts are held in individuals' names so that they remain with the person even if he or she retires or changes employers. Almost anyone can set up an HSA. The only exception is retirees over age 65 and on Medicare who are not allowed to contribute but may draw down funds from an HSA.

Credit Unions Realize Benefits from Cost Reductions, Provide Choices

1st Choice Credit Union($69M in Lincoln, NE) was able to reduce the cost of providing medical coverage 30 percent  by offering an HSA to employees. 1 st Choice fully funds the annual deductible of a HDHP through an HSA.

The credit union offers the option of either the company funded HDHP/HSA or a standard PPO  plan to employees. This allows young healthy employees who would benefit financially from having an HDHP/HSA to elect this option. However, those with reservations about having a HDHP can select the more conservative PPO option.

''I am happy with the HDHP/HSA personally and professionally,'' said Dale Springer, CEO. Springer deems the program a success based on its ability to save the credit union money and increase employee satisfaction and because of his own positive experiences with an HSA.




June 27, 2005


  • Our cost of health insurance has increased because of two individuals on our payroll. One is a longtime employee with twenty years of service. Therefore, we are looking of ways to cut the costs for other employees. This sounds like something we would be interested in.
  • Taxpayers can deduct contributions to HSAs from their gross income, and the interest and investment earnings generated by the account are also not taxable while in the HSA. Amounts distributed are not taxable as long as they are used to pay for qualified medical expenses.
  • Is HSA exempt from FICA, Medicare and State Income Taxes?