HSA

What are the Hidden Benefits of an HSA?

Most people know the triple tax savings HSAs offer, including tax-free contributions, tax-free earnings, and tax-free withdrawals for qualified healthcare expenses. However, while HSAs primarily help reduce healthcare costs, they also have lesser-known values. So, what are the hidden benefits of an HSA? HSA Portability When you have an HSA, you keep and use those … More >>

LSA

What is an LSA?

Although popular in countries such as Canada, Lifestyle Spending Accounts (LSAs) are relatively new in the U.S. and attracting a lot of attention. So, what is an LSA? LSA Basics LSAs are employer-funded accounts that employees use to pay for products, services, and activities that help support employee well-being. Qualified expenses may relate to physical, … More >>

COBRA FAQ

COBRA Insurance FAQs

COBRA insurance may be a vital lifeline for American workers who experience a qualifying event resulting in loss of coverage. Check out our COBRA FAQs to learn more. What is COBRA? The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) is a federal law that deals with healthcare coverage cancellations due to certain “qualifying events.”  … More >>

HRA

What is an HRA?

HRA Basics Health Reimbursement Arrangements (HRAs) are tax-advantaged accounts that reimburse individuals for qualified healthcare costs. The IRS first acknowledged HRAs in 2002 as benefits that employers could offer current and former employees, including retirees. Legislative and regulatory activity has since modified some of the rules about HRAs and created new types, including Group Benefit HRAs, … More >>

fsa status change

FSA Status Changes and Contributions

In addition to health insurance eligibility, family status changes can impact consumer-directed healthcare accounts. Here’s how mid-year status changes affect FSA and Dependent Care accounts. Can I change my health FSA contributions? Employees may choose FSA participation during open enrollment. This includes deciding on an annual contribution amount up to the IRS-mandated maximum. Health FSA accounts … More >>

healthcare consumer

What is Healthcare Consumerism?

Healthcare consumerism is a movement to refine the efficiency and affordability of healthcare services by changing how people prioritize their healthcare. Imagine a system where patients are more knowledgeable and active in purchasing healthcare services.  Healthcare consumerism works to make this a reality. Healthcare Consumerism Basics At its core, healthcare consumerism seeks to make patients … More >>

HRA HSA

Can I Have an HRA and HSA Simultaneously?

Healthcare spending accounts, such as Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs), help people pay for qualified medical expenses. They also provide more control over how and where to pay for those expenses. Some employees may have simultaneous HRA and HSA eligibility through their employer or when combined with their spouse’s employment options. … More >>

IRS Releases 2024 HSA Limits

The Internal Revenue Service (IRS) published the 2024 annual contribution limits for Health Savings Accounts (HSAs) on May 16. They also announced high deductible health plan (HDHP) minimum deductibles and out-of-pocket maximums for next year. 2024 HSA Contribution Limits For 2024, HSA owners will see a significant increase in the amount they can contribute to their accounts. … More >>

COBRA

What is COBRA?

Employees who lose their jobs or have reduced work hours may lose their company-sponsored group health insurance. However, COBRA can provide temporary, continued coverage while pursuing a replacement. Although COBRA is not new, those who have never used it may not have a good understanding of how it works. COBRA Extends Health Plan Coverage The … More >>

transfer

One-Time IRA-to-HSA Balance Transfers

Health Savings Accounts (HSAs) help employees manage their healthcare costs while also planning for retirement. Account owners can access their balances tax-free to pay for eligible healthcare expenses and invest unused funds for growth over time. But did you know that account owners can also make a one-time transfer from an IRA into their HSA … More >>

change of status

Mid-Year Coverage Changes and HSA Contribution Limits

Did you know that mid-year coverage changes can affect the Health Savings Account (HSA) account owner’s annual contribution limit? The following provides an overview of regulations, plus examples of how the changes are calculated. If you own an HSA, you can change your contribution amount at any time during the plan year, subject to the … More >>

HSA Contributions

Employer Contributions to Employee HSA Accounts

Health Savings Accounts, or HSAs, are popular savings tools for healthcare and retirement expenses. Eligibility is tied to enrollment in qualified high-deductible health plans (HDHPs), but anyone may contribute funds, including employers. As they seek more ways to attract and retain valuable talent, what should employers know about HSA contributions? Contribution Amount Each year, the IRS … More >>

Health Reimbursement Arrangement

FAQs About HRAs

Health Reimbursement Arrangements (HRAs) help employees pay for out-of-pocket medical expenses for themselves and their covered dependents. The sponsoring employer chooses the amount available each year and the eligible expenses. Below are answers to common questions about these tax-advantaged accounts. Frequently Asked Questions What is a Health Reimbursement Arrangement? An HRA is an employer-owned and … More >>

Using Benefits to Increase Employee Satisfaction and Retention

Employers invest substantial time and money into employee benefits programs. Yet myths, misconceptions, and confusion may prevent employees from getting maximum and practical benefits from them. Effective communication and education can improve benefit utilization, employee satisfaction, and talent retention. FSAs and Employee Satisfaction Flexible Spending Accounts (FSAs) continue to be a popular benefit option. Yet, … More >>

Saving for Retirement with HSAs

Health Savings Accounts (HSAs) help make healthcare more affordable and provide more freedom in personal healthcare decisions. They can also play a significant role in saving for retirement. Due to their multiple tax advantages, generous contribution options, and valuable investment opportunities, HSAs effectively supplement traditional retirement accounts. HSAs and Healthcare HSAs can be used to … More >>

Benefits for “Unretiring” Workers

Baby Boomers, born between 1946 and 1964, have significantly impacted American society and the workplace. A generation known for hard work and professional loyalty, many were forced to retire early due to pandemic-related concerns. However, many are now re-entering the workforce. Characteristics of the Baby Boomer Generation Although 65 is the traditional retirement age, the Bureau of … More >>

HRA plan

HRA Plan Facts: Qualified Expenses, Taxes, and More

Health Reimbursement Arrangements (HRAs) are employer-sponsored plans that reimburse participants for qualified expenses. These accounts are entirely funded by the sponsoring employer. Let’s learn more about HRAs by looking at plan facts like qualified expenses, taxes, and more. Generally, there are no limits on employer contributions to regular HRA plans. However, an exception is the … More >>

4 Things to Know About Limited-Purpose FSAs

Many of you are familiar with healthcare Flexible Spending Accounts (FSAs). Employees set aside a portion of their pay before taxes are calculated and use the money to pay eligible medical expenses. Less well-known is the Limited-Purpose FSA (LPFSA). Here are 4 things to know about limited-purpose FSAs. What do Limited-Purpose FSAs do? The LPFSA … More >>

FSA HSA switching

Switching Between FSA and HSA

Although FSA accounts are compatible with any health plan, HSAs require simultaneous enrollment in an HSA-eligible, high-deductible health plan (HDHP). If your health coverage changes, you may change from an FSA in one plan year to an HSA in the next, or vice-versa. The IRS has specific rules that apply to this type of account … More >>

HSA Investing for Tax-Free 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 in … 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

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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 >>