Do you ever hear grumbling from your employees when they learn they have to pay a deductible for health related services? To ease the burden of deductibles, copays and coinsurance, employers can set up Health Savings accounts and / or Flexible Spending Accounts that reimburse employees tax free. Employers and employees may contribute tax free dollars to both accounts through the plan year.
FSA’s are limited in the amount employees and employers may contribute and the amount changes each year. The money generally must be used within the plan year, however employers do have two options to offer. The first is to provide a “grace period” of up to 2 ½ extra months that allows employees to use up the money in their FSA. The second option is to allow employees to carry over up to $500 per year to use in the following plan year.
HSA’s are similar to FSA’s but can only be used by employees enrolled in approved high deductible plans. Like FSA’s, HSA’s are limited to in the amount employees and employers may contribute, but the amount is greater than that of an FSA. The benefits of an HSA are, the unused money rolls over each year, the money in the fund can be invested in mutual funds, is owned by the employee, and can be used as a retirement fund with tax benefits.