Months after the initial outbreak, the COVID-19 pandemic continues to have a significant impact on millions of Americans. Job losses, hospitalizations, and new waves of infection have left many Americans searching for a way to regain financial stability and peace of mind.

In these uncertain times, health savings accounts, or HSAs, have emerged as a powerful way to aid Americans who might be struggling with health or financial wellness challenges. And recent IRS expansions have made HSAs even more robust by adding to their already powerful tax benefits.

Over-the-counter drugs and medicines can now be purchased using tax-free HSA funds without a prescription, and vaccinations continue to be considered “preventive care.” In addition, testing and treatment for COVID-19 can now be covered by HSA-qualified health plans even if participants have not met the deductible. Finally, HSA-qualified health plans beginning before January 1, 2022 can now be used to cover telehealth and other remote care services below the deductible.

These recent HSA expansions have brought benefits for employers as well. Employers that meet the Section 7 (a) PPP loan guidelines set by the CARES Act can contribute loan funds into their employees’ HSAs. Even better, if the employer meets the loan forgiveness guidelines, those HSA funds are also eligible to be forgiven.

Employers looking to reduce expenses might consider a low-cost Bronze HealthPlan but offer a significant HSA contribution to help employees cover potential out-of-pocket costs. These employer HSA contributions can act as an additional stimulus to help employees cover qualified medical costs during the COVID-19 crisis, and those contributions are tax-free for employers as well. In addition, employers do not pay FICA taxes on contributions to employees’ HSAs.

HSA contributions also have far-reaching advantages for employees. Because HSAs stay with account holders for life, they can access their funds even if they change jobs or are furloughed. Additionally, HSA funds can be used to pay COBRA premiums or any other health insurance premiums if account holders are receiving federal or state unemployment benefits. And, as long as employees are covered under an HSA-qualified plan, they can continue to make tax-free HSA contributions, even if they withdraw those funds immediately to pay for medical expenses.

In addition to helping account holders save money on their current healthcare expenses, HSAs also shine as a long-term savings vehicle. According to EBRI, the average couple should plan to have $276,000 in savings to be able to pay for their non-Medicare-covered healthcare expenses in retirement. By investing their HSAs like a 401(k), savvy investors can grow tax-free medical nest eggs to pay for their retirement medical costs, rather than using taxable 401(k) funds. And once account holders turn 65, they can use HSA funds on non-medical costs with no tax penalty-- those distributions are treated like a traditional 401(k).

Now more than ever, HSAs shine as a flexible, robust tool to help account holders save money now and prepare for the future. By opening and utilizing HSAs, Americans can help create a happy, healthy future for themselves and their families.

This insightful article was written by James Denison, Marketing Director at HealthSavings Administrators (HealthSavings). HealthSavings is the original “Investors HSA.” Their account holders have historically saved five times more than the industry average. Visit HealthSavings.com to learn more.