What Is A Health Savings Account?
A health savings account is meant to offset the the extra cost of high deductible health insurance plans. As such, your employees must be on high deductible plans in order to qualify for an HSA. The minimum deductible to qualify for an HSA is $1,250 for individuals and $2,500 for families. The annual cap on contributions to an HSA is $3,450 for individuals and $6,900 for families.
What Is A Flexible Spending Account?
An FSA is a type of savings account that allows you to contribute pre-tax earnings to pay for certain health expenses. Contributions to an FSA cap out at $2,650 annually. The main benefit of an FSA is that it works with any type of health insurance plan, not just high-deductible plans.
What Are The Major Differences?
FSAs are employer owned. That means the account is connected to the job and when an employee goes, so does the money in the account. This money is typically returned to your business. The annual contribution cap is also much lower with a flexible spending account.
On the other hand, HSAs are owned by the employee. That means they can take the money with them when they change jobs. HSAs also rollover from year to year, so if you don't use the cash one year, it's still there for you the next.
Which One Should You Choose?
If your employees are already on a high deductible health plan, an HSA is a great choice. You just need to make sure that your high deductible plan is HSA compliant, which typically means no copays and specified coinsurance requirements. An FSA is more restrictive in many ways — employees must use the contributions each year and they can't take it with them if they change jobs — and it has a lower cap on annual contributions. Still, if your employees aren't on high-deductible plans and don't want to switch to one then an FSA can provide a nice cushion against healthcare costs, especially for employees who use their insurance often.
Both health savings accounts and flexible spending accounts offer your employees a break on their healthcare costs while also enjoying some tax benefits. It’s just important to know which option will work best with your health plan and be best received by your workforce.
At Summerlin-Roberts we can leverage our expertise in cost containment to provide the best possible benefits at the lowest possible price. Please, contact us today for more information on providing affordable health insurance for your employees.