It’s no question that a comprehensive benefits package is necessary to recruit and retain top talent, complete with medical coverage and offering flexible hours.
However, one of the more surprising elements of a benefits package involves benefit cost management. Today, employers can offer medical savings type of accounts (like an FSA or HSA) to help with qualified out of pocket medical expenses.
While both FSAs and HSAs make it easier to manage healthcare costs, there are fundamental differences between the two that you’ll need to be aware of when researching. To guarantee you know the best option for your employees, consider what each account has to offer.
An Overview of HSAs
HSAs, or Health Savings Accounts, are supplementary accounts for individuals with Qualified High Deductible Health Plans (QHDHPs), designed to help offset medical expenses. These are owned by the individual employee and typically are set up at a financial intuition by the employee. It must be a separate account.
Generally, HSAs fit into employee benefits packages when employees have selected a High Deductible Health Plan from their employer-sponsored marketplace – you must have a QHDHP in place before you can legally open an HSA.
Health Savings Accounts are tax-advantaged and rollover from year to year. If a qualified high deductible plan not one of your employees’ insurance options, you may consider offering a QHDHP to allow employees to set up an HSA to offset their costs.
An Overview of FSAs
Also known as Flexible Spending Accounts, FSAs are employer-established and typically funded by employees, though employers can also contribute. FSA funds can help supplement employee healthcare costs such as deductibles or copayments.
As a savings account that works for any health insurance plan, Flexible Spending Accounts use pre-tax dollars to help participants save on eligible healthcare costs.
FSA vs. HSA: Which is Best?
To be clear on which option is best for your employees, reflect on this side-by-side comparison of Flexible Spending Accounts and Health Savings Accounts:
Flexible Spending Account
Health Savings Account
|Account Ownership||Employer-established. If an employee changes jobs, they cannot take the account with them or access the funds.||Portable. When an employee retires or changes jobs, they can take the account with them and use the monies for qualified expenses.|
|Annual Contribution Limit||The contribution limit for 2017 is $2,600.||The 2017 limit is $3,400 for individuals or $6,750 for families.|
|Employee Eligibility||Available to any employee, regardless of health plan.||Only employees with QHDHPs are eligible to have HSAs.|
|Rollover||Option to rollover up to $500 of your unused balance – if the employer sets up carryover. The remaining amount If the employee does not use it, he/she will lose it.||All funds automatically rollover at the end of the year.|
So, which medical savings account is better for your employees? The short answer is: it depends.
More specifically, it depends on what you’re offering regarding health plans. Since HSAs are only available to employees with high deductible plans, it’s a natural option for employers providing QHDHPs. Otherwise, you’ll likely want to go with a Flexible Spending Account.
If you still aren’t sure which savings plan is best for you and your employees, get in touch with one of our dedicated ShopBenefits.com agents today! We’ll be happy to provide you with any answers you may need.