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Big Tax Breaks for Health Savings Accounts Get Even Better for NiSource Employees

'With recent tax rule changes, NiSource employees now have expanded opportunities to optimize their health care savings through health savings accounts (HSAs), which provide tax-free growth, tax-free withdrawals for medical expenses, and enhanced flexibility, making them an essential tool for retirement planning.' — Wesley Boudreaux, a representative of The Retirement Group, a division of Wealth Enhancement.

'Recent changes to health savings accounts (HSAs) offer NiSource employees valuable opportunities to not only save for medical expenses but also to take advantage of tax-free growth and withdrawals, making HSAs an indispensable tool for securing long-term health care savings.' — Patrick Ray, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article, we will discuss:

How health savings accounts (HSAs) work and their tax advantages.
Recent tax changes that expand the benefits of HSAs for NiSource employees.
The flexibility and unique features of HSAs, including contributions, withdrawals, and new eligible uses like fitness-related expenses.

For many years, individuals looking to combine health insurance with significant tax benefits have found health savings accounts (HSAs) compelling options. Over 60 million Americans currently use HSAs ¹ to take advantage of tax benefits and save for medical costs. The proposed tax and spending bill, approved by the House of Representatives in May 2025, could further enhance the benefits of these accounts. These changes, expected to be approved by the Senate in June, might expand the availability of HSAs to an additional 20 million Americans, marking the largest expansion since the program's creation in 2004.

NiSource employees, especially retirees and older workers, will greatly benefit from this HSA expansion. The new amendments aim to simplify the regulations, clarify unclear clauses, and allow previously prohibited uses, such as paying for gym memberships. These improvements could offer greater flexibility and provide an excellent opportunity to save money for long-term health care, making a significant impact for those nearing retirement or already retired.

How Health Savings Accounts Work

To qualify for an HSA, individuals must have a high-deductible health insurance plan, which typically requires the policyholder to pay a larger share of medical expenses up front compared to standard health insurance. When combined with an HSA, the individual or employer can make tax-deductible contributions to offset these higher costs. The HSA allows for tax-free investments and growth, as well as tax-free withdrawals for approved medical expenses.

The maximum tax-deductible contribution to an HSA for 2025 is $4,300 for individuals and $8,550 for family coverage. In addition, a $1,000 'catch-up' contribution is available for individuals aged 55 and older. This presents a prime opportunity for NiSource employees approaching retirement to increase their health care savings. HSA adoption is expected to grow significantly, with total assets expected to reach $147 billion by the end of 2024, up from $30 billion in 2015. ²

The triple tax benefits of HSAs distinguish them from other retirement savings accounts like 401ks and IRAs. Contributions to an HSA lower taxable income, funds grow tax-free, and withdrawals for approved medical expenses are tax-free. In contrast, withdrawals from 401ks and IRAs are taxable as income.

The Recent Modifications and Their Effects

Ten significant modifications in the new tax law will benefit individuals who use HSAs, particularly older Americans. Currently, Medicare beneficiaries enrolled in Medicare Part A at age 65 are restricted from contributing to an HSA. The new proposal allows these individuals to continue contributing to their HSA if they retain their employer health insurance. This change could be especially beneficial for NiSource employees who choose to remain on the company health plan rather than enrolling in Medicare.

Additionally, the new bill will make certain Affordable Care Act (ACA) plans, such as Bronze and Catastrophic policies, eligible for HSA benefits. This will benefit both younger employees who opt for catastrophic coverage under the ACA and older employees who retire before age 65 and use ACA plans until they become eligible for Medicare.

One of the most anticipated changes is the ability to use HSA funds for fitness-related expenses, such as gym memberships. Currently, HSA funds cannot be used for fitness-related activities, but the new law would allow tax-free withdrawals for these costs, with annual limits of $500 for individuals and $1,000 for families. This change encourages employees to focus on preventative health care, potentially reducing long-term medical expenses.

Other Advantages and Characteristics of HSAs

HSAs offer significant flexibility compared to other retirement savings accounts. Withdrawals can be taken years after the expenses are incurred, as long as proper documentation is available. This makes HSAs a great option for employees looking to save for future health care costs without needing to use the funds immediately. Additionally, after age 65, individuals can withdraw HSA funds for non-medical expenses, although these withdrawals are taxable as income.

NiSource employees will also benefit from the option to make family contributions to HSAs. Children under the age of 26 who are covered by their parents' health insurance may make contributions to their own HSA, even if they are no longer dependents. This allows families to provide long-term support for medical expenses, helping to build a more comprehensive health care savings plan for future generations.

In Conclusion

For NiSource employees looking to save for health care expenses in retirement, HSAs offer a flexible and tax-efficient way to do so. The recent legislative changes, including expanded eligibility and enhanced benefits, will make it easier for more employees to take full advantage of these accounts. With higher contribution limits, the ability to use HSA funds for fitness-related costs, and continued tax-free growth, HSAs present a powerful tool for retirement savings.

By adopting these changes, NiSource employees can optimize their health care savings and prepare for medical expenses in retirement. Whether through increased contribution limits, expanded eligibility, or greater flexibility in how funds can be used, these modifications offer new opportunities for employees to plan for their future health care needs.

The proposed changes also include the option for spouses to contribute to a shared HSA, beginning in 2026. This is a major benefit for older couples planning for retirement, as it allows them to pool their resources and take full advantage of the catch-up contributions. With these new rules, NiSource employees can further streamline their health care savings strategy, preparing for both immediate and long-term needs.

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Sources:

1. The Wall Street Journal, 29 May 2025, pp. A1–A2. https://www.wsj.com/personal-finance/taxes/hsa-2025-changes-6d6314eb

2. Devenir, 2 April 2025. https://www.devenir.com/devenir-report-shows-hsa-assets-reach-nearly-147-billion-by-year-end-2024/

Other resources:

1. U.S. Department of the Treasury, Jan. 2025, pp. 1–15. https://www.irs.gov/publications/p969

2. HealthEquity, Nov. 2024, pp. 1–10. https://www.healthequity.com/library/hsas-medicare-and-retirement-savings

4. Fidelity Investments, 2025, pp. 1–5. https://www.fidelity.com/viewpoints/wealth-management/hsas-and-your-retirement

5. The Motley Fool, 1 Nov. 2023, pp. 1–3. https://www.fool.com/retirement/2023/11/01/4-surprising-hsa-benefits-that-all-retirees-should/

As an employee of National Grid, what are the key eligibility criteria for participating in the Pension Plan specifically for Niagara Mohawk Power Corporation employees? How might these criteria impact your personal retirement planning and the benefits you expect to receive upon retirement from National Grid?

Eligibility Criteria for Niagara Mohawk Pension Plan: Employees of Niagara Mohawk Power Corporation who are represented by Local Union 97 of the IBEW and work at least 20 hours per week or accumulate 1,000 hours in a Pension Plan year are eligible. Participation begins automatically on the first day of employment. These criteria directly impact retirement planning by determining when employees begin accruing pension benefits and how much they will receive at retirement(National_Grid_2023_Niag…).

Within the framework of the National Grid Pension Plan, how does the cash balance formula work in calculating retirement benefits, and what implications does this have for employees of Niagara Mohawk Power Corporation when considering their long-term financial outlook?

Cash Balance Formula: The National Grid Pension Plan for Niagara Mohawk employees uses a cash balance formula that provides monthly pay-based credits (starting at 4% and increasing with years of service) and interest credits. These accumulate in a hypothetical account, growing until retirement, allowing employees to track their retirement benefits much like a savings account. This formula impacts financial outlook by providing predictable growth tied to service and pay(National_Grid_2023_Niag…).

For employees at National Grid, what are the specific rights and options available during the pension benefit application process? How do these rights protect the interests of individual employees and ensure they receive fair treatment under the Niagara Mohawk Pension Plan?

Pension Benefit Application Process: National Grid employees must apply for their pension benefits by submitting the required forms at least 90 days before retirement. Spousal consent is required if opting for any form of payment other than the default. This ensures employees understand and select the best payment option for their circumstances, protecting their interests under the Niagara Mohawk Pension Plan(National_Grid_2023_Niag…).

Given the different types of credits that contribute to the pension benefit for employees of National Grid, how are Pay-based Credits and interest credits calculated? What strategies might Niagara Mohawk Power Corporation employees employ to maximize these credits before retirement?

Pay-based and Interest Credits Calculation: Pay-based credits are determined by years of service, starting at 4% of pay and increasing to 8% after 20 years. Interest credits are based on an annual interest rate tied to the Treasury securities and corporate bond rates. Employees can maximize these credits by continuing to work and contributing to their pension balance(National_Grid_2023_Niag…).

How do pension benefits work for Transition Group Employees specifically within National Grid's framework, and what unique provisions apply to them under the Pension Plan as compared to regular employees of Niagara Mohawk Power Corporation?

Pension Benefits for Transition Group Employees: Transition Group Employees under the National Grid Pension Plan have benefits calculated using both the former final average pay formula and the cash balance formula, with the greater benefit being paid out. This differs from regular employees who only receive benefits calculated under the cash balance formula(National_Grid_2023_Niag…)(National_Grid_2023_Niag…).

What are the repercussions for National Grid employees in terms of benefit loss or limitation if they have not met the Vesting requirements under the Niagara Mohawk Pension Plan? How can understanding these repercussions influence an employee's decision-making regarding their career and retirement?

Impact of Vesting Requirements: Employees must complete three years of service to become vested in the Niagara Mohawk Pension Plan. If they leave before vesting, they lose all accrued pension benefits. Understanding vesting requirements is crucial for career and retirement planning, as it ensures employees retain their pension benefits if they meet the criteria(National_Grid_2023_Niag…).

As a current employee at National Grid, what does the termination of the Pension Plan imply for accrued benefits under the Niagara Mohawk Pension Plan? Specifically, how do federal protections through ERISA and the Pension Benefit Guaranty Corporation come into play for employees seeking assurance regarding their retirement funds?

Termination of Pension Plan and Federal Protections: If the Niagara Mohawk Pension Plan is terminated, accrued benefits are protected by ERISA and insured by the Pension Benefit Guaranty Corporation (PBGC). Employees can feel assured that their benefits will be secured up to the PBGC's limits in case of plan termination(National_Grid_2023_Niag…).

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Disability and Military Service: Niagara Mohawk employees receive service credits during periods of disability or military leave, ensuring continuous pension accrual. Employees should ensure their disability or military status is properly documented with the company to avoid interruptions in their pension benefits(National_Grid_2023_Niag…).

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Annuity vs. Lump-Sum Payment: Retirees at National Grid have the option to choose between an annuity, providing a steady income for life, or a lump-sum payment. The annuity provides financial stability, while a lump sum offers flexibility. The choice depends on individual financial needs and retirement goals(National_Grid_2023_Niag…).

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