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7 HSA/FSA Facts Your Clients' Employees Should Know

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The open enrollment period for health benefits is a time for employees to sign up for benefits that will protect their health, strengthen their finances and keep their families secure.

It can also be a great time for brokers and clients to use the benefits package as a tool for acquiring and retaining talent.

(Related: Employer Interest in Private Exchange Programs Drops: Kaiser)

Consider these results from a recent MetLife employee survey: 

  • 61% of employees say they are more likely to accept a job that offers health and well-being benefits,

  • 59% say health benefits would make them more loyal.

  • 51% say they are more likely to accept an offer that comes with financial benefits, and

  • 53% say they would be more loyal to a job that has benefits that help them get their finances in order.

A strong health savings account (HSA) program or flexible spending account (FSA) program can make a great differentiator. It can help the employees protect their health and strengthen their finances.

Growing use of high-deductible health plans (HDHP) is contributing to an increase in popularity for both FSAs and HSAs. In fact, HSA enrollment was up 53.7% in 2016, and there were 27.4 million FSAs in use last year. The number of FSAs in use is expected to grow to 32.3 million by 2020.

These tax-advantaged accounts can help cushion users of HDHP coverage against the effects of the high deductible, by letting account holders set aside pre-tax money to pay for current health expenses. HSA users can also save money for post-retirement health care expenses.

For all that growing popularity, though, FSAs and HSAs are only useful if employees understand them. If employees lack this knowledge, they may not enroll in the accounts or use an existing account to its full potential.

So, what can brokers and employers do to maximize enrollment in this valuable benefit and help employees become savvy health care shoppers during open enrollment? Start by talking about the seven following HSA and FSA topics with the clients’ employees.

1. The key benefits of opening an account.

The value of saving for health care expenses cannot be over emphasized, but there are few key benefits that employees should be aware of, including:

  • Triple-tax savings;

  • Convenience;

  • Meeting out-of-pocket maximums, copays and coinsurance;

  • Supplementing health plan coverage;

  • Saving for “big ticket” items or expenses, such as elective surgery; and

  • Saving for expenses in retirement.

2. How to maximize contributions.

The amount each employee contributes to his or her account will depend on their individual circumstances. Start by educating employees about the current contribution limits, the tax benefits of funding their accounts, and relevant employer matching, and tools available to help them estimate their annual health care needs. Consider directing employees to an online FSA or HSA calculator to help them plan their contributions and estimate savings.

3. What, if any, spending deadlines apply.

This applies only to FSAs. If the FSA has a spending deadline, be sure to communicate that clearly to employees.

Calendar (Image:iStock)

(Image: iStock)

You will want to take time to clarify any extensions that are offered, as well, such as a carryover option (this allows employees to roll over up to $500 in unused FSA dollars from year to year), a grace period (this gives account holders an additional two-and-a-half months to spend down their unused FSA funds), or a run-out period (this gives employees extra time to file reimbursement requests for expenses incurred in the previous year).

4. How to track expenses throughout the year.

One easy way to relieve the stress of managing spending deadlines is to help employees track their expenses throughout the year. Nor only should you encourage employees to anticipate potential expenses, but consider connecting them with online tools that can help them track their spending as the year progresses so they avoid any surprises at year end.

5. How to invest HSA funds.

A unique feature of HSAs is the ability to invest a portion of unused funds into stocks, bonds and mutual funds. If an HSA comes with an investment platform, be sure employees understand how this feature works and how it might benefit them.

6. What is an eligible expense?

The list of eligible products and services for FSAs and HSAs is long, diverse, and sometimes surprising. While many people think about eye glasses, contacts or dental expenses when using their spending account, the eligibility list covers many unexpected items, such as:

  • Defibrillators,

  • Prenatal vitamins,

  • Glucose monitors and supplies,

  • Wearable blood pressure monitors,

  • Lip balm (with an SPF of at least 15), and

  • Breast pumps.

Helping employees understand what’s eligible enables them to make wise use of their accounts for timely, personally relevant products and services. Online eligibility lists make it easy for account holders to get current information about how and where they can spend their money.

7. How to save time and reduce health care paperwork.

Not only can people save money with an FSA or HSA, but they can save time and eliminate paperwork by using an FSA or HSA debit card. Because the card links directly to an individual’s account, giving them immediate access to funds when they are making their purchases, they do not need to file a claim for reimbursement.

FSAs and HSAs can be powerful tools for people who understand them and know how to take full advantage of their unique benefits. Ensure that employees have the information they need by communicating clearly and consistently about these key topics during open enrollment and throughout the year.

— Read 9 FAQs about HSAs, FSAs and HRAs on ThinkAdvisor.

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