Is a Health Savings Account or Flexible Spending Account Right for My Employees?
When it comes to tax-advantaged healthcare accounts, two options often come up: Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). Both offer ways to save on medical expenses, but they work differently—and choosing the right one depends on your health plan and your team’s needs.
What Is an HSA?
A Health Savings Account is available to employees enrolled in a high-deductible health plan (HDHP). It allows individuals to set aside pre-tax dollars to pay for qualified medical expenses.
Key Features:
Employee and employer contributions allowed.
Funds roll over year to year—no ‘use it or lose it’.
Money belongs to the employee—even if they change jobs.
Funds can be invested for future growth.
What Is an FSA?
A Flexible Spending Account is typically offered alongside traditional health plans. It also allows employees to set aside pre-tax dollars for medical expenses, but it has stricter rules than an HSA.
Key Features:
Funded by employee contributions (employer can contribute too).
‘Use it or lose it’—unused funds may be forfeited at year-end (some plans offer a short grace period or limited rollover).
The money in the fund is owned by the employer, not the employee.
Funds are available up front, even if not fully contributed yet.
HSA vs. FSA: Quick Comparison
Eligibility: HSAs require enrollment in a qualified high-deductible health plan. FSAs do not.
Rollover: HSA funds never expire. FSA funds usually must be used by year-end.
Portability: HSA money stays with the employee. FSA funds do not.
Investment capabilities in that HSA funds can be invested, but FSA funds cannot.
What Should Employers Consider?
If you offer a high-deductible health plan, an HSA is a great complement and a strong retention tool.
If you offer traditional PPO plans, an FSA still provides great tax advantages.
You can offer both (to different employee groups) depending on plan eligibility.
Choosing the right account type—or offering both—can help employees better manage healthcare costs and make your benefits package more valuable.
Ross Durham, Employee Benefits
For more information contact the Frost / Beck Insurance Agency. Call us at 419-592-4476, send an email to frost@frostins.com, or click here to submit your request today! Or, stop by and see us at one of our four convenient locations in Archbold, Napoleon, Holgate, or Whitehouse.
Coming Next Week:
We’ll explore how to use Employee Navigator to streamline your benefits administration.
