Tax-Favored Accounts: HSA and FSA

Health savings accounts (HSAs) and flexible spending accounts (FSAs) are tax-advantaged offerings employees can use to save money for their medical expenses. HSAs require enrollment in a qualified high-deductible health insurance plan, and money is placed in the account via pre-tax payroll deduction. HSAs have no time limit for using funds. FSAs are similar to HSAs but are available to any employee regardless of health plan type. Unlike HSAs, FSAs have a “use it or lose it” structure, so the employee forfeits any money left in the account at the end of the tax year. Dependent care reimbursement accounts (DCRAs) and commuter benefits also fall under this category. Speak with an employee benefits service like James G Parker Insurance Associates to choose the right combination of accounts for your company.

Health Reimbursement Arrangement (HRA)

A relatively new option for employers, health reimbursement arrangements are accounts that allow employers to give employees money to use on their healthcare expenses (including copays and premiums). Employees must be enrolled in qualified health insurance coverage to access HRA funds; this coverage is usually purchased via the healthcare marketplace. Because of the tax and legal implications for both the employee and the employer, companies are encouraged to seek expert assistance when considering if this option is right for them.