Choosing the Right Benefits for Employees
Choosing the Right Flexible Benefit for Employees Trying to decide which of the many employer-sponsored benefits out there to offer employees can leave an employer feeling lost in a confusing bowl of alphabet soup—HSA? FSA? DCAP? HRA? What does it mean if a benefit is “limited” or “post-deductible”? Which one is use-it-or-lose-it? Which one has a rollover? What are the limits on each benefit?—and so on. While there are many details to cover for each of these benefit options, perhaps the first and most important question to answer is: which of these benefits is going to best suit the needs of both my business and my employees? In this article, we will cover the basic pros and cons of Flexible Spending Arrangements (FSA), Health Savings Accounts (HSA), and Health Reimbursement Arrangements (HRA) to help you better answer that question. Flexible Spending Arrangements (FSA) An FSA is an employer-sponsored and employer-owned benefit that allows employee participants to be reimbursed for certain expenses with amounts deducted from their salaries pre-tax. An FSA can include both the Health FSA that reimburses uncovered medical expenses and the Dependent Care FSA that reimburses for dependent expenses like day care and child care.
-Benefits can be funded entirely from employee salary reductions (ER contributions are an option)
-Participants have access to full annual elections on day 1 of the benefit (Health FSA only)
-Participants save on taxes by reducing their taxable income; employers save also by paying less in payroll taxes like FICA and FUTA
-An FSA allows participants to “give themselves a raise” by reducing the taxes on healthcare expenses they would have had anyway
-Employers risk losing money should an employee quit or leave the program prior to fully funding their FSA election
-Employees risk losing money should their healthcare expenses total less than their election(the infamous use-it-or-lose-it – though there are ways to mitigate this problem, such as the $500 rollover option).
HRAs are also subject to many of the same non-discrimination requirements as the Health FSA-HRAs often go under-utilized; employers may pay an amount of administrative costs that is disproportionate to how much employees actually use the benefit-Employers can often get “stuck in the weeds” with an overly complicated HRA plan design. Such designs create frustration on the part of the participants, the benefits’ administrator, and the employer Design or TPA Assistance At B3PA, the benefits third-party administrator powered by HR Service, we are eager to help you navigate through this confusion. With 15+ years’ experience in administering FSA, HSA, HRA, LFSA, Commuter and transit benefits we have the experience to help you design the program that works best for you. For further information regarding the differences between these benefits, or to begin setting up one of these solutions, contact B3PA or HR Service at (833) 685-8400 x 1 or Solutions@hrserviceinc.com. Visit us online at www.HRServiceInc.com