The basics of tax-advantaged accounts

Also referred to as consumer-driven accounts, the health savings account (HSAs), flexible spending account (FSAs) and health reimbursement account (HRAs) can help your employees manage their health-related expenses, and help both you and your employees save money at tax time.

Health savings account (HSA)

Among the best-known contribution plans. An HSA must be linked to a qualified HSA-compatible high deductible health insurance plan. Employee contributions are tax-deductible, lowering the amount you pay toward workers’ Social Security and Medicare. Employer contributions can increase plan participation; they may also be deductible as a business expense, and roll over each year.

Flexible spending account (FSA)

A flexible spending account is a pre-tax contribution plan that you can offer as a voluntary benefit. Typically, an FSA is employee-funded, but you, as the employer, can also choose to contribute. Tax benefits mirror those of HSAs. In addition, an employer may keep any funds remaining in an account if an employee leaves the company.

Health reimbursement account (HRA)

Health reimbursement account is not like HSAs and FSAs. HRAs are 100% funded by the employer (you). They can co-exist with any type of health plan, and be used to pay for deductibles, co-pays and other qualified medical expenses to soften the impact of healthcare expenses on employees. A significant advantage of an HRA is that any unspent funds are returned to the employer.

Want to know more?

Our professional health and benefits insurance agents at Automatic Data Processing Insurance Agency, Inc. (ADPIA®) are here to help you understand your benefit options. We can explain more about how Consumer-Driven Accounts can help you save money, attract the best workers and keep your best employees.

Contact us for help finding the right coverage for your business.