HSAs Unlock New Designs for Health FSAs
Health Savings Accounts (HSA) are designed to bring consumerism to health
care by engaging participants in the decision making process. These types of
accounts are rapidly growing in popularity because they slow the cost increase
of employer benefit plans, provide a new vehicle for retiree health and bring
many individuals affordable health care options.
When employers offer HSAs under a cafeteria plan, they also provide both
company and employee tax savings. However, these configurations of HSAs and
FSAs do come with several design requirements in order for participants to be
eligible to participant in an HSA.
HSA participation is limited to individuals who enroll in a high deductible
health plan with a minimum deductible of $1,000 for single and $2,000 for family
coverage. There can be no other coverage than the expenses attributable to the
deductible.
A trend Infinisource has noted is employers maximizing their savings by offering
the new HSAs and designing them in conjunction with limited, single, or post-deductible
FSAs. This plan design maintains the tax advantages previously enjoyed, and perhaps
expected by employees when they elected a Health FSA. Care must be taken in plan
design to ensure these innovative Health FSA plans will allow the individual to
qualify for an HSA.
The chart below shows how these new plan types might be designed.
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Single Coverage Health FSA
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Generally, FSAs cover expenses incurred by all eligible dependents.
It is not required for an individual to enroll their spouse or children in
order to receive reimbursement for their medical expenses. Employers could offer
?single only? FSAs so that individuals can avoid disqualifying their spouse from
being an eligible individual for an HSA.
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Post-Deductible Health FSA
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An individual could not be reimbursed for any medical expenses incurred before the
minimum annual deductible is satisfied.
The deductible for the FSA does not have to be the same as the deductible for the
HDHP, however the HDHP cannot pay anything until the HDHP deductible has been satisfied. If the HDHP and the FSA do not have
identical deductibles, contributions to the HSA are limited to the lower of the
deductibles. Although the deductibles
of the HDHP and the other coverage may be satisfied independently by separate expenses,
benefits cannot be paid before the minimum annual deductible has been satisfied.
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Limited-Purpose Health FSA
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An individual could still be eligible for an HSA if the coverage is limited to preventive
care expenses which includes the following:
- Periodic
health evaluations, including tests and diagnostic procedures in connection with routine
examinations such as annual physicals
- Routine
prenatal and well child care
- Child and
adult immunizations
- Tobacco
cessation programs
- Obesity
weight loss programs
- Screening
services
Preventive care generally does not include any service or benefit intended to treat
an existing illness, injury or condition.
Keep in mind that over-the-counter (OTC) drugs are not listed as permitted coverage
items unless the drug constitutes preventive care and satisfies Code Section 213(d)
requirements.
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Combined Post-Deductible Health FSA
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Individuals could be reimbursed for their dental, vision or limited medical expenses
once their HDHP deductible has been satisfied for any 213(d) medical expense.
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For more information on HSAs, FSAs and other employee benefit administration and compliance issues please call Infinisource at 800-779-6384 or send an email to solutions@infinisource.net.
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