While typical healthcare insurance can be very effective for many of your business’ employees, out-of-pocket medical expenses, such as deductibles and co-payments or dental charges, can still present serious financial challenges. In turn, that increases the risk of employees not seeking necessary treatment. This could lead to the potential worsening of health problems, which could leave some employees unable to work.
This isn’t a typical investment, as the money doesn’t grow, but it is an effective way of managing money for a specific purpose.
The other big advantage is that money put in to the flexible spending account (FSA) isn’t taxable. This results in a reduction in the payroll taxes paid both by the employing business and the employees.
It’s important to note that any contribution from the employer is payable as a lump sum at the start of the year, and will be available to the employees even if the employee leaves the job. The employee pays their contributions to the flexible spending account (FSA) over the year in regular installments.
In addition to a Flexible Savings Account, we offer Health Savings Account (HAS) options for employers who have high-deductible medical plans. Like the FSA, the Health Savings Account is a tax-advantaged account that allows employees to defer pre-tax income into their HSA.
Unlike the FSA, the HSA money accrued rolls over annually and acts as a true savings account. The money accrued belongs to the employee and is available to draw on tax-free after reaching legal retirement age.
An HSA provides tax-advantaged options while also providing a medical savings account that can be used for eligible medical expenses or saved for future expenses. The money belongs to the employee no matter what – the account and the money saved in it follows the employee to a new job, to retirement or to a new health plan.
There are investment options available to some HSAs – certain amount of the money can be invested in a mutual fund if the employee chooses to do so.
Do you think a flexible spending account (FSA) or health savings account (HAS) might help be right for your team? If so, contact our employee benefits team to get started.