HSA Investing for Tax-Free Garden Growth

Did you know that HSA owners enjoy tax-free interest on balances and tax-free returns from HSA investing? Health Savings Accounts (HSAs) are tax-advantaged savings accounts that help people with a high deductible health plan pay for out-of-pocket medical expenses. Since their inception in 2004, HSAs have become very popular. Devenir’s 2022 midyear report finds almost $99 billion … More >>

Men

Movember and Men’s Healthcare

Each November, men across the globe grow mustaches to spotlight issues within men’s healthcare. Let’s talk about some of the most common issues and how consumer-directed healthcare accounts can help cover related expenses. Men’s Healthcare: Cancer Screenings After non-melanoma skin cancer, the CDC reports, prostate cancer is the most frequent type that men experience. Although … More >>

FSA vs. HRA vs. HSA: The Differences

When it comes to FSA vs. HRA vs. HSA, can you tell the differences? Each has a distinct purpose. Below is a quick overview and helpful infographic that compares specific features of each type of account.

Three consumer-directed healthcare (CDH) benefit accounts offer tax advantages. They include Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs), and Health Savings Accounts (HSAs).

While these accounts bear some similarities, they are not the same. Employers sponsor all of them, and they all offer tax advantages, help offset the cost of medical care, and help individuals take more control of their healthcare. However, beyond that, there are striking differences. 

FSA vs. HRA vs. HSA: The Overview

Flexible Spending Account (FSA)

Funding:  FSAs are owned by the employer. Participants contribute the funds, although employers may choose to contribute.

Contributions:  Participants reduce their tax liability by making pre-tax contributions. For 2023, the maximum annual election will be $3,050 for healthcare FSAs and $5,000 for DCAPs (Dependent Care Assistance Plans), often offered alongside healthcare FSAs.

Eligible Expenses:  Participants can use FSA funds to pay for a wide range of out-of-pocket medical expenses approved by the IRS. Eligible purchases include copays, deductibles, and coinsurance for medical care, prescriptions, eye exams, eyeglasses/contacts, dental care, first aid supplies, over-the-counter (OTC) medications, and more.

Unused Funds: There are three options to address unused funds at the plan year’s end. Each plan adopts one of the three as chosen by the employer.

  • ‘Use It or Lose It’ – Leftover funds are forfeited to the employer.
  • 2.5-Month Grace Period – Extra time is provided to spend the funds.
  • Carryover – Participants carry over a certain amount of unused funds to the next plan year; for 2023, the carryover limit will be $610.

Portability: FSAs are not portable. The employer owns the accounts, so participants cannot keep them if they change employers (voluntarily or involuntarily) or retire.

Other Important Facts: FSAs are “notional” accounts. That means participants must incur an eligible expense before administrators process a reimbursement. A significant advantage to the participant is that the funds do not need to accrue before use. The total annual election amount is available to spend immediately after the plan year starts.

Health Reimbursement Arrangement (HRA)

Funding:  HRAs are owned and funded by the employer only.

Contribution Limits:  There is no government-mandated limit on funding. The employer determines the amount each year. Since the employer is the sole contributor, there are no contribution tax breaks for the employee. However, employer contributions are not counted as income to the employee-participant.

Eligible Expenses: Employee participants can use their HRA to pay for qualified out-of-pocket medical expenses for themselves and their dependents. HRA-qualified expenses are determined by the employer and may vary from one company to the next. 

Rollover:  Unused funds may roll over from year to year, either in total or up to a certain amount, depending on the plan parameters.

Portability:  HRAs are not portable. An employee-participant loses access to the funds if he or she changes employers (whether voluntarily or involuntarily). Employers who offer retiree health insurance benefits may also offer an HRA for former employees enrolled in the retiree health plan.

Other Important Facts:  HRAs are “notional” accounts, meaning the participant must incur a qualified expense before funds are paid out. Self-employed persons are generally ineligible to have an HRA. However, if the self-employed person’s spouse is considered an employee of the business and receives a W-2 paycheck, then the spouse can have an HRA.

Health Savings Account (HSA)

Funding: HSAs are owned by the employee (although some employers also choose to contribute).

Contribution Limits: For 2023, the maximum annual election is $3,850 for employees with individual health coverage and $7,750 for those with family coverage. 

Eligible Expenses: Employee participants can use their HSA to pay for the same IRS-approved out-of-pocket medical expenses as FSAs. In addition, HSA owners can use their funds to pay premiums for COBRA, long-term care, and Medicare Parts A and B.

Plan Requirement: To be eligible to contribute to an HSA, the employee-participant must be enrolled in an HSA-qualified high-deductible health plan (HDHP).

Unused Funds: The account automatically renews at the plan year’s end, and any unused funds roll over to the next year.

Portability: HSA accounts, being individually owned, stay with the employee-participant for the life of the account, no matter their employment status.

Other Important Facts:

  • HSAs offer three tax advantages. Contributions are deducted from payroll before tax calculations. Withdrawals for qualified expenses are tax-free. Interest on the balance and any investment earnings are also tax-free.
  • Account owners may invest their HSA dollars once they meet the minimum balance threshold required by their plan provider.
  • Account owners over age 55 can make an extra “catch-up” contribution of up to $1,000 per year above the annual limit.
  • HSA owners under age 65 incur both income tax and non-qualified withdrawal penalties. However, when they turn 65, funds used or withdrawn for non-eligible expenses are only considered regular income for tax calculations.

FSA vs. HRA vs. HSA: The Infographic

More >>

2023 Limits Increase for FSA, Transit, Adoption

The IRS published Revenue Procedure 2022-38 on October 18, 2022, detailing 2023 limit increases for Flexible Spending Accounts (FSAs), Transit, and Adoption benefits. FSA Limit for 2023 The maximum annual contribution for Health FSAs is rising from $2,850 in 2022 to $3,050 in 2023. Dependent Care FSA limits remain $5,000 for married couples filing jointly … More >>

2023 ACA Compliance Reporting

Each year when the 4th quarter rolls around, employer workloads grow tremendously, from processing new benefits to closing out the current year. With regulatory changes over the last two years, it’s vital to ensure that you maintain compliance. So let’s review the Affordable Care Act, or ACA, compliance reporting due in the first quarter of … More >>

Captain Contributor Explains ICHRAs

” An Individual Coverage Health Reimbursement Account, or ICHRA, is a special type of HRA that employers can use to help employees obtain health insurance coverage without the need to offer a group health insurance plan.  Watch this video to learn more about ICHRAs! Captain Contributor – Benefits Super Hero Captain Contributor Explains ICHRAs Captain Contributor Explains … More >>

Back to School

FSA Help Pay for Back-to-School

Flexible Spending Account (FSA) holders with calendar-year plans have barely three months left in their plan year, and some are looking for ways to spend down their balances. Although we’re past the back-to-school period here in Arkansas, you can still use FSA dollars to cover certain school supplies. Some schools ask families to continuously replenish … More >>

allergies flu COVID

Is it Allergies, Flu or COVID?

From hayrides and warm apple cider to Halloween festivities and Thanksgiving homecomings, people look forward to Fall. But the return of cooler temperatures also brings an increase in hay fever and a rise in cold and flu rates – and there could be another COVID wave. When you sneeze or cough, how do you know … More >>

Inflation Reduction Act May Impact Group Health Plans

President Biden signed the Inflation Reduction Act (IRA) into law on August 16, 2022. Among other provisions, the IRA: Addresses aspects of the Affordable Care Act (ACA) Requires Medicare to negotiate drug prices with manufacturers Caps the cost of prescribed insulin for Medicare recipients at $35 a month Provides an insulin safe harbor for high-deductible … More >>

3 Ways to an Easier Enrollment

Is your company getting ready for open enrollment? It can be a stressful time for HR and employees alike. An estimated 45% of workers say they are apprehensive about the open enrollment process. Here are three ways to help ease the stress of enrollment season. #1: Take Active Steps to Fend Off Stress and Burnout HR … More >>

travel

Using Your Benefits to Ease Travel Stress

This summer has been hard on travelers, from high gasoline prices to numerous canceled flights. Whether traveling for business or pleasure, no one has been immune from it. Here are eight ways you can use your benefit accounts to help ease travel stress. 1. Stock Up on Medications Use your FSA or HSA account to … More >>

healthcare consumer

Do You Know About PCORI…

…and how it affects patients and employers? Two significant drivers of escalating healthcare costs are a lack of knowledge about the cost of medical services and low levels of patient engagement in their healthcare decisions. However, thanks to healthcare consumerism, this is starting to change. Healthcare consumerism is a movement to improve the quality of healthcare … More >>

COBRA compliance

COBRA Compliant? Are You Sure?

Many employers are out of COBRA compliance but don’t realize it. Are you sure your company is following all the rules? Is your company meeting its COBRA obligations in compliance with all applicable rules and regulations? Chances are, you’re not, at least if you are self-administering them. In fact, the IRS estimates that 90% of … More >>

ICHRAs Benefit All Businesses

Attractive benefits plans are essential in today’s labor market. Smaller businesses often struggle to find affordable group health insurance plans that comply with ACA regulations. Let’s look at how an Individual Coverage Health Reimbursement Arrangement, or ICHRA, can offer big benefits for all businesses. What is an ICHRA? ICHRAs are an attractive option for both employers and … More >>

surprise

Surprising FSA-Eligible Expenses

Healthcare flexible spending accounts (FSAs) let you use pre-tax funds to pay for some medical, dental, and health-related products and services, including certain over-the-counter items. Most people know FSA eligible expenses include doctor visits, surgery and other medical procedures, prescription medicines, dental, vision, chiropractic, and mental health services. However, there are some eligible expenses that … More >>

reporting requirements

2022 Reporting and Compliance Requirement Updates 

Over the last couple of years, COVID created some temporary and potentially permanent changes to employer reporting requirements. As COVID moves from pandemic to endemic, let’s review the status of reporting requirements for 2022. PCORI Fee Change For plan years that end on or after October 1, 2021, and before October 1, 2022, the new PCORI … More >>

contribution limits

IRS Announces 2023 HSA Limits

The Internal Revenue Service (IRS) published the 2023 annual contribution limits for Health Savings Accounts (HSAs) on April 29. They also announced high deductible health plan (HDHP) minimum deductibles and out-of-pocket maximums for next year. 2023 HSA Contribution Limits For 2023, HSA owners will see a significant increase in the amount they can contribute to their accounts. … More >>

debit cards

Debit Cards are a Benefits Must Have

During the pandemic, the use of debit and credit cards has soared. A 2021 MarketWatch analysis found that debit card transaction volumes continue to surge, while growth in credit transactions has remained essentially flat. Always a possible addition to tax-advantaged benefit accounts, debit cards have increasingly become a benefits “must have.” Employees Save Time Offering … More >>

LSA

Lifestyle Spending Accounts Can Help Attract and Retain Employees

Many employers are experiencing first-hand how hard it has become to attract and retain a great workforce. You may have young, healthy employees who don’t see much benefit in traditional health plans. Other workers may be ineligible for the traditional benefits you offer but still expect some type of assistance. The onus now is on … More >>

Some Nutritional Needs Qualify as FSA/HSA-Eligible Expenses

No, you can’t use your Flexible Spending Account (FSA) or Health Savings Account (HSA) for straight food purchases like meat, produce and dairy. But you can use them for some nutrition-related products and services. To review, tax-advantaged accounts have regulatory restrictions on eligible products and services. The products and services must have a medical purpose, … More >>

Furloughs, Layoffs and COBRA

Just as we thought the pandemic was easing and we could start to recover from job losses, rising oil prices and potential interest rate increases may again affect the job market. Read on to learn about furloughs, layoffs, and COBRA. You’ll also learn about COBRA eligibility, qualifying events, and how much coverage costs. Furlough or … More >>

QSEHRAs: Effective Small Business Benefit Tool

Employers have been helping employees with healthcare costs since employer-sponsored insurance coverage began about 80 years ago. But just as healthcare costs have risen, the costs of insurance and healthcare benefits have increased as well. Small businesses have always found it financially challenging to offer group benefits to their employees. Fortunately, Congress and regulatory agencies … More >>

woman preventive care

Reducing Out-of-Pocket Expenses for Women and Children’s Preventive Care

New preventive care and screening guidelines aimed at reducing out-of-pocket expenses for women, infants, children, and adolescents were recently announced by the Health Resources and Services Administration (HRSA) of the U.S. Dept. of Health and Human Services (HHS) The new guidelines take effect for plans starting in 2023. Under the Affordable Care Act (ACA), certain group … More >>

New Year, New You with Employee Wellness Programs

As we welcome a new year, many of us are focused on how we can better ourselves and are making new resolutions. Some are emphasizing physical health, vowing to eat better and exercise more. Others are targeting their financial health, making an effort to spend less and save more. Some are centered on taking care … More >>