Don't Let Hard-Earned Money Vanish: HSA and FSA Account Reminders for Year-End

As the end of the year approaches, there is a lot on your employee’s minds. Everything from holiday preparations and year-end work duties, to planning out some resolutions for the new year ahead of them. Whether or not they have remaining HSA and FSA funds remaining in their accounts may not be at the forefront of their minds. Employers can help their employees on the company medical plan by reminding them not to let their health and finances fall to the wayside. While HSA and FSA provide tax-advantaged savings on an employee’s medical expenses throughout the year, they come with a unique twist: any unspent balances typically don't carry over into the following year. It is important to provide your employees with these reminders and emphasize the importance of reviewing and utilizing any remaining funds before the year comes to a close.

The Difference Between an HSA and an FSA

An employee needs to know what kind of accounts they have working alongside their medical plan, as each account has a unique list of purchases that qualify under them. Let’s look at some of the differences between HSA and FSA accounts.

• HSA (Health Savings Account): An HSA is a tax-advantaged savings account designed to cover qualified medical expenses. Contributions made into these accounts are tax-deductible to the employee, and any remaining funds typically do roll over from year to year.
• FSA (Flexible Spending Account): An FSA is also a tax-advantaged account designed to cover out of pocket healthcare expenses, but it is employer-sponsored. While a flexible spending account does still allow for tax-free contributions, most of these accounts have a "use it or lose it" policy. Meaning, any remaining employee contributions would be forfeited at the end of the plan year.

Review Account Balances

An employee may not be aware of just how much or little funding their accounts have remaining in them at the end of the year. An employee may want to make different decisions about their health depending on the amount remaining in the account. Luckily, many HSA and FSA providers have online portals or mobile apps where account holders can access their account information to review their current balances.

Understand The Plan

Rules regarding carry-over balances are unique to each employer and benefit plan. This is why it is so important to understand company and plan-specific HSA or FSA plan details.

• Contribution Limits: Verify how much they’ve contributed and whether they can make additional contributions before the year-end. There is a maximum contribution limit to some accounts, so it is important to know whether or not an employee has reached that threshold.
• Eligible Expenses: Not all purchases are considered eligible to be covered by an HSA or FSA account. Employees need to review the list of qualified medical expenses to ensure they’re using their funds for allowable purchases under their plan.
• Deadlines: While some plans give a grace period to incur expenses in these accounts, others do not. Knowing the deadline for incurring expenses can play a key role in whether expenses may be eligible for coverage, and factor into an employee’s yearly health plan. Each plan also has a unique carry-over limit into the following year. If any employee has any funds over the acceptable threshold, those funds may be forfeited going into the new year.

Plan Medical Expenses

Once an employee is informed about the unique details of their plan and accounts, they can plan how to spend their remaining funds. Some strategies that employees can use are:

• Schedule Appointments: If an employee has been putting off any medical or dental check-ups, now is the perfect time to make those appointments to use any remaining funds.
• Stock Up on Supplies: Employees can use their FSA or HSA to purchase qualified medical supplies like bandages, first-aid kits, or over-the-counter medications.
• Consider Vision and Dental: Expenses related to vision and dental care, including eyeglasses, contact lenses, and dental cleanings are also things that employees can consider using their account balances on.
• Plan for the Future: If an employee knows that they have a large medical expense coming up in the next year, they could consider paying for all of or a portion of that expense in the current year.

Keep Receipts and Documentation

It's important to keep any documentation of an employee’s expenses made with account funds throughout the year, including receipts and invoices. These documents can serve as support or evidence in the event they need to substantiate any claims or verify any expenses.

Use Account Tools

Employers are often able to provide various tools and resources to help their employees manage and understand their HSA and FSA accounts. These tools can include things such as online calculators, mobile apps, and customer service hotline lists. Reminding employees of these tools and resources can help them better manage their accounts

Communicate With The Benefits Team

If an employee is uncertain about various aspects of their HSA or FSA, the employer should advise them to reach out to their HR department or benefits team. These teams are well-versed in the company benefit plan specifics and can clarify any questions an employee may have to help them make the most of their benefits.

It is important that employees take the time to understand their plans and review their account balances so that they can strategically plan their medical expenses throughout the year. As an employer, you can support your employee’s financial and wellness goals by reminding them of these things as the end of the year gets closer.