by WEX Benefits
HSAs. FSAs. LSAs. If you’ve never been asked if you would like to participate in an employee benefits account before, you might be asking yourself, “What are all these acronyms?” In the second blog post in our three-part series to educate first-time participants, we walk through a few factors you should consider when choosing among employee benefits accounts for the first time.
Considerations for choosing benefits
When evaluating your options, consider your personal circumstances, health status, and financial situation. Keep these factors in mind:
- Medical needs: Estimate your medical needs for the coming year. Do you anticipate regular doctor visits, ongoing prescriptions, or any planned medical procedures.
- Coverage requirements: Consider any specific coverage requirements, such as prescription medications, specialists, or pre-existing conditions.
The number of health savings accounts (HSAs) has doubled nationwide in the last seven years, as more Americans turn to these accounts as a way to save on healthcare costs and prepare for retirement. To take advantage of an HSA, you need to participate in an HSA-eligible health plan (or high-deductible health plan).
HSA-eligible health plans typically have lower premiums but higher deductibles. Assess your ability to cover the deductible before choosing this plan. Funds you or your employer contribute to your HSA can help with this.
Watch the video to hear more from our own Jason Cook about the retirement-planning potential of an HSA.
Exploring HSAs and FSAs
- Tax benefit: Contributions to HSAs and FSAs are tax-deductible and reimbursements for qualified medical expenses are tax-free.
- Savings potential: HSAs and FSAs establish a strong financial cushion for anticipated healthcare needs. HSAs stand out for their unique feature of allowing the rollover of funds from year to year.
- Portability: HSAs are portable, meaning you can keep and use the funds even if you change jobs or health plans. FSAs are employer-owned, meaning you may lose the funds if you change job or health plans. Limited FSA as a savings account: Limited FSAs can also be used as a savings account for anticipated medical expenses. By estimating your annual healthcare costs, you can contribute pre-tax dollars and use them as needed throughout the year.
Other popular benefits options
Although HSAs and FSAs consistently top the list of most popular benefits options, there are other options to explore that may provide the help you need:
- Lifestyle spending accounts (LSAs): These accounts provide a employers with an opportunity to contribute funds in an account for expenses related to wellness, fitness, and even education. LSAs are becoming more popular as employers recognize the importance of holistic well-being. They can be used for activities such as gym memberships, yoga classes, or even language courses.
- Health reimbursement arrangements (HRAs): HRAs are employer-funded accounts designed to cover specific healthcare expenses. They can be used in conjunction with certain health plans and offer a predetermined amount of funds for eligible costs. HRAs provide an extra layer of financial support for medical needs beyond insurance coverage.
- Commuter benefits: If your daily routine involves commuting, commuter benefits can help you save money on transportation costs. These benefits allow you to set aside pre-tax dollars to cover expenses related to public transit, parking, or even rideshares.
- Pet benefits: For those who consider their furry friends part of the family, pet insurance and other forms of pet benefits can help cover unexpected veterinary costs. It ensures that your pets receive the care they need without straining your finances.
- Supplemental life insurance: While your employer might offer a basic life insurance policy, supplemental life insurance allows you to tailor coverage to your unique needs. It's a valuable way to provide additional financial support for your loved ones in the event of the unexpected.
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