Helping employees prepare for and manage the cost of deductibles and out of pocket expenses is just as important as helping them obtain the core medical, dental and vision coverage they need. Helping them manage those costs and save tax dollars at the same time is a huge bonus. Our team will help you design your program to ensure that every advantage is available to you and your employees.
Health Savings Accounts (HSA’s)
A Health Savings Account (HSA) helps you manage your health care spending and prepare for the cost of deductibles and out of pocket expenses not covered by your health insurance policy. They also may give you a stronger role in the medical services decision process because you often have opportunities to decide which products or services to pay for when insurance is not paying the bill.
An added benefit to the HSA is that the money you save remains part of your retirement account, even if you leave your current employer. The money you deposit in an HSA, while it remains dedicated exclusively to qualified medical expenses until you reach retirement age, is still your money. When you do reach retirement it can be used without penalty.
You can also save the money in your account and grow your account through investment earnings. Funds in the account can grow tax-free through investment earnings, just like an IRA. In short, if you don’t use all the money in your HSA for medical expenses, it can accumulate as tax-free savings for your retirement. Unspent account balances accumulate and accrue interest from year-to-year.
These plans are tied to your medical plan and the deductible and out of pocket limits on those plans. HSA compatible health insurance plans define deductible and out of pocket limits that can be offset by your HSA contributions. Employees are eligible to deposit up to $3,500.00 to their HSA in 2017.
Flexible Spending Accounts (FSA’s)
Flexible Spending Accounts allow your employees to set aside a portion of their paychecks for healthcare and dependent day care expenses before taxes are calculated. The more they take advantage of this benefit, the less they pay in taxes and the less you’ll pay for payroll taxes, including Social Security and Medicare. Depending on your state, a Flexible Spending Account program may also reduce the cost of your workers’ compensation insurance.
Unlike HSA’s, though, it is important to remember that FSA’s do not build in value over time if the money is not used during the year it was set aside. Money added to an FSA plan for the current year but not used in that year is returned to the employer. Some plans may allow a portion of the money collected to carry over the next year.
Health Reimbursement Arrangements (HRA’s)
HRA plans are employer-funded medical reimbursement plans. The employer sets aside a specific amount of pre-tax dollars for employees to pay for health care expenses on an annual basis. Based on the plan design, HRAs can generate significant savings in overall health benefits.
The primary requirements for an HRA are that (1) the plan must be funded solely by the employer and cannot be funded by salary reduction, and (2) the plan may only provide benefits for substantiated medical expenses.
HRAs may be designed in many fashions to suit the specific needs of the employer and employees. It is one of the most flexible types of employee benefit plans making it very attractive to most employers.