With the end of the year on the horizon, many employees will start to plan out the rest of their health savings account (HSA) funds and flexible savings account (FSA) funds and how to spend them. It’s important for employers to keep in mind the distinction between HSA and FSA funds in order to prepare for questions that employees might have in the coming weeks about their benefits.
What is a Health Savings Account (HSA)?
A health savings account (HSA) is a personal bank account with significant tax advantages that can be used by an individual to pay for medical expenses that aren’t covered by their insurance, typically on high-deductible health insurance plans (HDHP). HSAs are important because offering flexible, competitive benefit packages is one way to help recruit strong candidates and retain employees.
Do HSA Funds Carry Over From Year to Year?
HSA funds automatically carry over from year to year and the money can be used indefinitely, as long as the purchase is a qualified medical expense. There is a limit to the amount that a person or family can contribute to their HSA each year, as well as other limits and policies that the IRS updates each year.
What About FSA Funds?
Unlike HSAs, flexible spending accounts (FSAs) do not automatically carry over from year to year and must be spent by the end of the calendar year or end of the plan year. Sometimes, there may be a grace period depending on the plan. FSAs allow employees to set aside pre-taxed funds for healthcare or dependent care expenses and unlike HSAs, you do not have to be a member of a high deductible health plan to contribute to an FSA.
Please reach out to the Cypress Benefit Solutions\’ team for any guidance around your employee benefits package as we wrap up 2020 and start planning for 2021.
Source: Bernie Portal