Health savings accounts (HSAs) have become increasingly popular but they often come with misconceptions. To help employees make informed decisions, let’s debunk common HSA myths and shed light on the HSA facts that matter. HSA Fact #1: HSAs are Employee-Owned While employers may choose to contribute to an employees’ HSA, it’s important for employees...
Expanded public transit. The rise and rebound of ridesharing. Increased work-from-home arrangements. The work commute has changed a lot recently, as lawmakers and civic officials grapple with how to effectively support people traveling to and through ever-growing cities. New York City, Washington, D.C., Chicago, Philadelphia and Seattle are among cities that have enacted laws and...
What are pre-tax savings and post-tax savings? Understanding taxes relating to health savings accounts (HSAs), flexible spending accounts (FSAs) and other benefits plans can be time-consuming and difficult to explain. Pre-tax savings are tied directly to FICA taxes. You may be wondering what FICA is and how does pre-tax savings work for HSAs and FSAs?...
In 2023, mental health became a top priority for employees and employers. According to a SHRM study, 41% of U.S. employees said they would likely or would very likely leave their current job if they were offered a new position with significantly improved mental health benefits. While many companies offer employee assistance programs (EAPs), it’s...
Welcome to 2024! As we get ready for another year of sharing the latest benefits trends and practical tips to enhance you and your employees’ benefits experience, let’s look back at our most popular blog posts from 2023. Get the Best Results from Your Benefit Budget Conversations Benefits are critical for attracting and retaining...
As we age, the importance of maintaining safe mobility within our home becomes critical. It is crucial to understand how to save money on common at-home expenses with health savings accounts (HSA) and flexible spending accounts (FSA). From home modifications to adaptive equipment, creating an environment that not only nurtures a person’s well-being but also...
Did you know that, when employees were asked on a scale of 1 to 10 how confident they are in their understanding of their benefits, 34% chose 7 or less. Only 25% responded with a 10. That was just one of the findings from a survey of benefits participants WEX launched in May 2023. Often,...
When it comes to navigating the world of employee benefits, there’s a lot to take in, especially if you’re a first timer. Among the suite of benefits you’re likely to be offered, voluntary benefits are often misunderstood. What are Some Examples of Voluntary Benefits? Voluntary benefits include a variety of options, all designed to...
As most organizations are already in the thick of annual benefits enrollment, the IRS announced that employees can funnel an extra $150 into their health flexible spending accounts (FSAs) next year. The annual contribution limit is rising to $3,200 in 2024, up from $3,050 in 2023. If the employer’s plan permits the carryover of unused...
Participating in a health savings account (HSA) or flexible spending account (FSA) is a great way to save money. Below, we’ve outlined the key differences between an HSA and an FSA so you can see how they work, the advantages of each and why you should participate in them.
Health savings account
An HSA is an individually owned benefits plan funded by you or your employer that lets you save on purchases of eligible expenses. You must be enrolled in a high-deductible health plan (HDHP) to be eligible, which lowers your insurance premiums.
HSAs have a triple tax advantage, meaning distributions for qualified medical expenses and investment returns are tax-free and contributions are tax-deductible. HSA funds can be invested for potential growth.
Our HSA comes with a low investment threshold, and our online account and mobile app make it easy for you to make the most out of your funds.
Flexible spending account
An FSA is an employer-owned account that you use to set aside funds for qualified expenses. You can enroll in an FSA during open enrollment, when you’re hired or when you experience a status change, such as marriage or birth/adoption of a child. We offer four common types of FSAs:
Medical FSA
Limited Medical FSA
Combination FSA
Dependent Care FSA
You can save on eligible expenses with an FSA. For example, if one employee is enrolled in a medical FSA, he or she reduces the taxable income, which reduces the amount subject to Social Security and Medicare. You won’t need to pay Social Security or Medicare taxes on the funds going into the FSA.
Key differences between HSAs and FSAs
Ownership: You own your HSA. Your employer owns your FSA.
Contribution Limits: The amount varies for each, as determined by the IRS. The 2022 HSA limits are $3,650 for self-only and $7,300 for family. The 2022 FSA limits are $2,850 for medical, limited and combination FSAs. For dependent care FSAs, the limit is $5,000.
Health Plan Eligibility: HSA participants must be enrolled in HDHPs. FSA participants need to simply be offered a group health plan by their employer.
Carryover: All HSA funds carry over from year to year. Employers can only allow up to a $570 carryover of medical FSA funds, while dependent care FSA funds do not carry over.
Investment Capability: You can invest in HSA funds, but not FSA funds.
Can I have both an FSA and an HSA?
Yes, but there are restrictions. If you participate in an HSA, you can also participate in a limited medical FSA, a combination FSA or a dependent care FSA. You can’t participate in an HSA and a general-purpose medical FSA. There are perks to participating in both accounts.
Is an HSA or FSA use-it-or-lose-it?
The IRS’ use-or-lose rule states that FSA funds must be spent by the participant within the FSA’s plan year. That means FSA participants typically need to spend most or all their FSA funds by the end of the plan year. Unused funds at the end of the plan year are forfeited to the plan.
The use-or-lose rule doesn’t apply to HSAs. All HSA funds carry over from year to year.
Watch the below video from Wex’s Benefits Buzz podcast to hear from Rida Wong of Health-E Commerce about the primary differences between an HSA and an FSA.
Education is critical to get the most out of your employee benefits. Stay updated on the latest trends and insights by subscribing to our blog!
The information in this blog post is for educational purposes only. It is not investment, legal or tax advice. For legal or tax advice, you should consult your own counsel.