3 End-of-Year HSA and FSA Reminders for Employees
With the end of the year quickly approaching, employees will need to keep FSA and HSA spending in mind. From use-it-or-lose-it deadlines to FSA-eligible products, it’s important to remind your employees how—and when—to use their funds.
Refresher: The Difference Between FSAs and HSAs
A flexible spending account (FSA), also called a flexible savings arrangement, allows employees to set aside pre-tax funds for healthcare expenses or dependent care expenses. Employees decide how much is put into their FSA, up to a limit.
Meanwhile, a health savings account (HSA) is a personal bank account with significant tax advantages that can be used by an individual to pay for medical expenses, typically on high-deductible health insurance plans.
While both account types are used to pay for qualified medical expenses pre-tax, there are significant differences between the two to keep in mind.
How Can Employers Help?
With everything to keep track of at the end of the year, employers can send employees key reminders regarding their FSA and HSA planning. Here are 3 key things to communicate with your employees during Q4:
- Deadlines: While HSA funds roll over year to year, FSAs tend to expire at the end of the calendar year (or at the end of the plan year). However, there may be a carryover or grace period, depending on the plan. It’s important for employers to remind their teams as those deadlines approach and whether or not there’s a grace period for FSA funds.
- FSA and HSA-Eligible Products and Services: There may be some health services and products that your employees aren’t aware of that they can use their FSA and HSA funds on. Surprising services and products include service animal expenses, thermometers, vision correction, and sunscreen. Be sure to share the FSA Store’s list of eligible items with your employees to make sure they know their options.
- CARES Act Changes: The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) changed certain requirements for HSAs, FSAs, and HRAs that make it easier for employees to pay for certain everyday medical care and items. These changes removed the requirement for a prescription when purchasing over-the-counter medicine with HSA and FSA funds and made menstrual products FSA- and HSA-eligible. It also made it so that telemedicine services can be covered with HSA funds before a deductible has been met—unless extended, this update will expire December 31, 2021.
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