Health Savings Account- HSA
The Health Savings Account is an account created for the insured to deposit monies for qualified health care costs. These funds earn interest tax-free and must be paired with a QHDHP according to IRS regulations. Contributions to the HSA can be made by the insured, the employer or both. Total contributions are limited annually and change each year. Funds remain in the account from year to year and are “owned” by the insured. For more information on the HSA go to www.treas.gov and click on “Health Savings Account”.
Health Reimbursement Account -HRA
The Health Reimbursement Account is also one of the newer “consumer driven” health care products. This reimbursement plan is funded by the employer. Employees have a high deductible plan but a portion of their deductible is funded by the employer. This is a tax-deductible contribution for the employer and tax-free benefit for the employee.
Flexible Spending Account – FSA
The Flexible Spending Account is also known as Section 125 Cafeteria Plan and allows employees to contribute an annual amount from their pay into a personal account. These monies can then be used throughout the year to pay for health related expenses as well as dependent daycare. These funds are deducted pre-tax reducing employees taxes as well as employer tax liability. These funds must be used by year end. The “use it or lose it” rule applies with the FSA Plan.
There are three types of plans:
- Premium Only Plan – Allows for pre-taxing health insurance as well as all voluntary benefits creating a tax savings for your employee.
- Health Reimbursement Plan – Allows for reimbursement of qualified health expenses, i.e. deductibles, co-pays and over-the-counter OTC supplies.
- Dependent Daycare Reimbursement – Child care expenses can be reimbursed using this account creating a substantial tax savings for your employee.