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Posted August 11, 2020

employee benefits basics

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It’s nearly open enrollment time for many of you! And your employer could be among those looking for ways to boost their employee benefits by enhancing existing plans or providing you with new savings opportunities. All of that means one thing for you: choice. With so many potential options available, how do you know which plan is right for you? We kick off our 2020 open enrollment series on our blog by outlining the basics of popular employee benefits plans. 

HSA

If you’re interested in participating in a health savings account (HSA), you’re not alone! The number of HSAs has more than doubled in the last five years. And, during that time, HSA assets nationwide have nearly tripled. 

So why the buzz around HSAs? It’s simple. Contributions are tax-free, earnings are tax-free and withdrawals for eligible expenses are tax-free. And the investment potential of an HSA is as good or better than what you’ll find using other long-term investment tools such as a 401(k) or an Individual Retirement Account (IRA). So, if you’re looking to save money on healthcare expenses and/or boost your retirement planning, HSAs are the perfect employee benefits account. Please note: You must be enrolled in a high-deductible health plan (HDHP) to be eligible for an HSA. 

FSA

When you participate in a flexible spending account (FSA), you set aside a set amount of funds (determined by you) before they are taxed which can later be spent on eligible expenses. There are four common types of FSAs: 

  • General-purpose medical FSA (medical FSA). Funds can be spent on eligible medical, dental and vision expenses. 
  • Limited-purpose medical FSA (limited FSA). Funds can be spent on eligible dental and vision expenses. 
  • Combination medical FSA (combination FSA). Account starts as a limited FSA but can be converted to a general-purpose medical FSA once you have met your deductible.
  • Dependent care FSA. Funds can be spent on eligible dependent care expenses, such as preschool, daycare and summer camps.

Please note: You can’t participate in an HSA and a general-purpose medical FSA. However, you can pair an HSA with a limited FSA, combination FSA or dependent care FSA. 

HRA

Health reimbursement arrangements (HRAs) are employer funded and employer owned. They’re generally used as a way for your employer to provide financial assistance for you to pay for eligible expenses. HRAs are also completely customizable by the employer, so make sure to check which type of HRA is being offered and what expenses are covered before evaluating how well it works for you. Check out this blog post to learn more about common types of HRAs. 

LSA

Lifestyle spending accounts (LSA) are also completely employer funded and employer owned. However, LSAs differ from HRAs in that LSAs are funded by your employer after funds have been taxed. Because there are no tax restrictions on how the funds may be spent, eligible expenses for an LSA can be anything your employer decides as a way to meet your needs. LSA eligible expenses typically fall into three wellness categories: physical, financial and emotional. 

Commuter Benefits

Would you believe the average one-way work commute in the United States is nearly a half-hour? And it’s a spendy 30 minutes, both for your mental wellbeing and your bottom line. By participating in commuter benefits, you can save 40 percent or more on eligible commuting costs, which can include mass transit, vanpooling and parking. These employee benefits let you set aside pre-tax dollars to pay for expenses related to your work commute. And you can change how much you contribute at any time. 

To shop for hundreds of HSA-eligible and FSA-eligible expenses, visit Health Shopper today!

Benefits Breakdown

HSAFSAHRALSACommuter Benefits
Who owns the account?You doYour employerYour employerYour employerYour employer
Who funds the account?You and/or your employerYou and/or your employerYour employerYour employerYou and/or your employer
Are contributions taxed?NoNoNoYesNo
Can I invest funds? YesNoNoNoNo
Do funds carry over from year to year?YesDetermined by your employer (IRS allows up to a $550 carryover)Determined by your employerDetermined by your employerYes
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