Our recent Employee Benefit Trends Study found that in this increasingly competitive job market, employees are interested in their employer offering a wider array of benefits. Two benefits in particular that have seen increased interest year-over-year are Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSA)1. The study found that 86% of employees are interested in their employer offering an HSA, and 84% are interested in their employer offering an FSA.
HSAs2 and FSAs are voluntary, tax-advantaged accounts that can provide several financial benefits for employees—and employers. Read on to learn how they can be misunderstood, as we dispel eight common myths about these products.
1. Myth: Employees don’t need a Healthcare FSA or HSA, if they have medical insurance coverage
HSAs and Healthcare FSAs are primarily used for qualified healthcare expenses. This may make some people think they’re unnecessary if employees are already covered by a health insurance plan. However, these accounts offer additional benefits. For employees with a High Deductible Health Plan (HDHP), an HSA can mean more available funds for out-of-pocket expenses today, while enjoying tax-free savings growth for future healthcare expenses.
Employees can use either type of account to pay for qualified healthcare expenses (with tax-free dollars) that a medical, dental, or vision plan might not cover, including copays, deductibles, prescription drugs, over-the-counter medications, and more.
2. Myth: The programs are too expensive to offer
In addition to providing tax savings for employees, FSAs and HSAs have financial benefits for employers as well. Because employers own FSA funds, employers can avoid paying payroll taxes on employees’ contributions. (Employees can't take an FSA with them if they leave the employer.)
Also, when employees opt for a lower-premium HDHP to qualify for an HSA, that helps reduce your business expenses. You can also choose to make tax-deductible contributions to employees’ HSAs.
Bonus: With HSAs, employees will have a tangible financial benefit they can use now or allow their savings to grow tax-free for use later. Everyone wins.
3. Myth: Employees lose their HSA benefit, if they don’t use the funds
HSAs are different than Healthcare FSAs because HSAs are actual financial accounts. An employee owns their HSA and the funds in it; it is their money to use when they need to, and the money in their account will remain there until they are ready to use the funds. In fact, one of the appealing aspects of HSA funds is that the money can be saved and invested for the future. MetLife’s HSA offering has robust investment options for employees. Talk to your account representative to learn more.
4. Myth: An HSA is only for employees who have serious medical expenses
While employees must be enrolled in an HDHP to open or contribute to an HSA, the HSA funds can typically be used tax- and penalty-free for any type of qualified healthcare expense..
However, employees may want to open and fund an HSA, even if they don’t expect to have any upcoming medical expenses. Why? With an HSA, employees enjoy a triple tax advantage: Contributions are tax-free, and the money can be invested and grow tax-free. Withdrawals are also tax-free when the money is used to pay for qualified medical expenses.