Guide to Your Employers Benefits Programs, Tax-Wise (401(k) matching, HSAs, Flexible, etc.)

When you work for an employer, you'll usually receive a package of benefits in addition to your salary. Common benefits include insurance coverage, health savings accounts, flexible spending plans and retirement plans, such as a 401(k). Often, the value of these benefits is in the thousands of dollars. However, you generally don't have to pay taxes on these benefits. In fact, you may actually enjoy additional tax savings through your various employer benefit programs.

If your employer offers a 401(k) plan, it can be a great way to invest for your retirement. Your 401(k) contributions reduce your taxable income, and they grow tax-deferred until you take money out of the account.

Jeff Gonzalez, CPA and CFO at Los Angeles-based Electric Entertainment, says, "A 401(k) match is one of the best benefits you can get from your employer." In a 401(k) match, your employer deposits additional money into your account based on the amount you contribute. Typically, an employer will match up to 50 percent of the first 6 percent of your income that you contribute to a 401(k).

Gonzalez notes, "Even though a 401(k) match is money paid from your employer for your benefit, you don't have to report that match as income, and you don't have to pay tax on it when you receive it." You will owe tax on the matching funds when you withdraw them from your 401(k), as you will on all of your contributions and earnings.

A Health Savings Account is a tax-deferred way to help cover the costs of a high-deductible health insurance plan. Money you put into an HSA is tax-deductible, within limits. The money in your HSA can be used to pay medical costs if you haven't yet reached your deductible.

The limit to your HSA contribution is the lesser of your health plan deductible or IRS-prescribed limits. For 2012, the IRS limit is $3,100 for singles, or $6,250 for families. If you're over 55, you can put away an additional $1,000.

Gonzalez says some employers offer high-deductible health plans, or HDHPs, because they keep company costs low. "To protect employees from the higher deductibles," he says, "many employers offer an HSA concurrently with an HDHP." The true benefit of an HSA comes when your employer makes your contributions for you. "Since you're saving them money by accepting a high-deductible health plan, many employers will make contributions to an HSA on your behalf," says Gonzalez.

A flexible spending account is similar to an HSA, but with a few important differences. An FSA provides the same type of tax benefits, as the money you contribute comes out of your paycheck before you pay tax on it. However, the money in an FSA is generally used for medical expenses not covered by insurance, rather than for covered costs that are incurred before your deductible is met.

For example, you might use your FSA money for dental or vision expenses that may not be covered at all by your insurance. There is, however, no restriction on using your FSA funds to cover your deductible.

According to Gonzalez, "An important drawback of a Flexible Spending Account is that it operates under a 'use it or lose it' provision. Any money in your FSA that you don't spend by the end of the year vanishes. This is in marked contrast to an HSA."

Flexible Spending Accounts will face a dramatic change in contribution limits come 2013, when the FSA limit will drop to $2,500, indexed annually for inflation. This will be the first time that limits are imposed on FSA contributions.

Employers are required to provide numerous insurance and tax benefits to employees. Your employer pays for your unemployment insurance, allowing you to receive payments if you lose your job. You'll also benefit from workers' compensation insurance to cover your medical expenses if you get hurt on the job. Both of these benefits are provided without tax consequences to you, even though you are being provided with a valuable benefit for free.

If you work for an employer, rather than for yourself, you'll also save on taxes. As an employee, you have to pay only half of your Social Security and Medicare taxes. Your employer must pay the other half. This is a benefit that you can enjoy only as an employee, since if you're self-employed you have to pay both portions of these employment taxes.