HRAs, HSAs and FSAs are accounts that employees and their dependents may use to cover specific healthcare expenditures. They allow employees to pay for medical, prescription, dental and vision expenses while saving on taxes. These accounts are tax-advantaged, which means that payments are not subject to taxation. Below, the insurance agents at Unity Insurance discuss these different types of savings and reimbursement accounts and how they can benefit your employees.
Health Reimbursement Account
A Health Reimbursement Account is arranged and financed by the employer to assist employees in making payments for certain health care expenses. Anyone enrolled in an employer-sponsored health plan qualifies for an HRA. Because you, the employer, are the individual that finances the account, you are the only individual responsible for the expenses. Employees cannot make contributions to this account and will not have control over whether or not balances from this account can be carried over into the following year. Finances in an HRA cannot earn interest and cannot be used for expenses other than qualified health care.
Health Savings Account
A Health Savings Account is an account employees possess and contribute to. Employee contributions assist with payments for qualified health care costs. An HSA also adapts to high deductible health plans. Anyone who possesses a qualified high-deductible health care plan is eligible for an HSA. Employers, family members and others are also allowed to make financial contributions to employee HSAs.
There is a dollar limit that the IRS instated on HSAs. Unlike HRAs, interest can be earned on the funds in an HSA. When employees turn 65, they are able to use the money in the HSA for expenses other than qualified health care expenses. The money that is withdrawn is only subject to income tax. If employees decide to withdraw money from the HSA for non-qualified healthcare expenses prior to age 65, the funds will be taxed on income and employees may be charged with a penalty tax.
Flexible Spending Account
There are three different types of Flexible Spending Accounts. An FSA is a savings account that may be used for a variety of costs that are authorized depending on your company’s selected health plan.
Health Care FSA
A Health Care FSA is an account that will cover qualified medical expenses. If your company has a health care plan that encompasses an FSA, employees are qualified for a Health Care FSA. However, only you and the employee are allowed to make financial contributions to a Health Care FSA. The IRS has control over how much you and the employee are allowed to contribute to a Health Care FSA. Based on your company’s current plan, employees may be eligible to carry over a maximum of $500 into the following year’s plan.
Dependent Care FSA
A Dependent Care FSA is an account that employees may use to cover qualified health care for employee dependents. The only individuals that can qualify are any dependents of the employee under the age of 13, as well as disabled dependents of any age. Similar to a Health Care FSA, a Dependent Care FSA allows only you and the employee to make financial contributions. In addition, the IRS has control over how much you and the employee are allowed to contribute. Unfortunately, balances in Dependent Care FSAs do not roll over to the following year and employees will lose any finances left in the account.
Limited Purpose FSA
If your employee is enrolled in an HSA plan, they may use a Limited Purpose FSA to get reimbursed for qualified dental and vision expenditures. They are eligible for a Limited Purpose FSA if the company has a high-deductible plan that they withhold. Similar to other FSA accounts, only you and the employee are allowed to make financial contributions. In addition, the IRS has control over how much you and the employee are allowed to contribute. Based on the current plan, employees may be eligible to carry over a maximum of $500 into the following year’s plan.
Contact an Insurance Broker at Unity Insurance Today to Discuss Health Insurance Benefits
It’s important to understand the different types of coverage accounts that are available. The knowledgeable and experienced health insurance benefits specialists at Unity Insurance are able to walk you through the different types of HRA, HSA and FSA accounts so you can choose the plan that is right for you and your employees. Contact Unity Insurance today by calling (410) 539-6642 and learn more about health insurance benefits.