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Differences Between HSAs and FSAs

Open enrollment can be a difficult time for both employers and employees. Employers, for example, may deal with additional paperwork and time-consuming open enrollment and benefits administration processes. Meanwhile, employees may spend extra time searching for the best options without their employer's support, or not understand how to use the enrollment tools provided to them.


In an effort to simplify this process, SynchronyHR is sharing a series of employee benefit product overviews that can help your employees better understanding the benefit options available to them. This particular blog in the series focuses on the differences between Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs).



What Are HSAs?

An HSA is a Health Savings Account. This employee benefit feature helps employees put money aside for qualified medical expenses on a pre-tax basis. The funds are completely controlled by the employee and can be carried over without employment changes. Unused funds also carry over each year.


These plans require enrollment in a high-deductible health plan. They are used to pay for deductibles, copayments, coinsurance, and other expenses using untaxed dollars. That said, using an HSA might help employees lower their overall health care costs.


Better yet, an HSA's tax advantage, which can be compared to that of a traditional 401(k) plan, makes it an alternative way to save for retirement.


As an employer, you can put money into an employee's HSA, although there is a yearly limit set by the IRS.


What Are FSAs?

FSAs (Flexible Spending Accounts/Arrangements) are spending accounts that employees put money into to pay for out-of-pocket medical costs, similar to an HSA.


The account allows employees to contribute a portion of their regular earnings to their medical costs. Employers can also contribute. Similar to HSAs, funds withdrawn from the FSA for qualified expenses are not subject to tax.


These plans are only available to those that enroll in a health plan through their employer. With this employer involvement comes complications. When an employee leaves the organization sponsoring this plan, they lose access to their FSA unless eligible through COBRA. Employers also determine when funds within an FSA expire, or whether or not any funds rollover into the following year.


While HSAs offer more flexibility in their withdrawals, employees may need to access funds from a FSA by submitting a claim through their employer with proof of the medical expense and a statement as to why the expense was not covered under their health plan.


Working with SynchronyHR

Offering the right benefits is one of the best ways to show that you care about your employees. If you are a business owner looking to provide your employees with top-tier corporate employee benefits, including HSAs and FSAs, consider working with SynchronyHR.


We also provide support with open enrollment and benefits administration.


Contact us today to learn more!


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