Consistently encouraging employees to contribute to a health savings account (HSA) will only go so far. The best way to max out HSA participation rates is to stress its effectiveness as a retirement tool.

Here’s one thing many employees don’t know about HSAs: The funds left in them are not lost, they continue to grow.

The best way to relay that message to employees: Tell them HSAs work just like a 401(k), but with one big advantage — the tax-deferred funds that are put into the HSA can be withdrawn tax free when used to pay for qualified healthcare expenses.

And if a withdraw is made for another reason — say to pay for food, housing or a vacation — the money is taxed the same as a 401(k) withdrawal.

Now if employees wanted to use money from a 401(k) or IRA to pay for medical expenses, that money will be taxed as income by the IRS.

New contribution limits

Another thing to remind employees of: The maximum annual HSA contribution limits under high-deductible health plans (HDHPs) will change for 2012.

Individuals will be able to contribute up to $3,100 (up $50 from 2011), and families will be able to contribute up to $6,250 (up $100 from 2011).

Employees 55 and older will be able to contribute an additional $1,000 in 2012.

Tags: 401(k), contribution limits, expenses, funds, Health Savings Account, healthcare, high-deductible health plan, HSA, IRS, limits, medical expenses, participation, qualified, retirement, tool