Health Savings Account vs Flexible Savings Account
It's no surprise that healthcare is expensive and costs for healthcare are on the rise year after year. Clario offers spending accounts to help pay for qualified medical expenses on a pre-tax basis, however, there are some key differences and rules to a Health Savings Account (HSA) and a Flexible Spending Account (FSA).
Health Saving Account
The Health Savings Account (HSA) is a bank in your name. The bank provides you with a debit card or you can choose to request a distribution to pay yourself or your provider at www.MyFlexDollars.com or by using the MyFlexDollars mobile app; either or both may be used to pay for out-of-pocket costs.
Clario's Health Savings Account (HSA) administrator is Baker Tilly Vantagen. For 2024, Clario will fund the HSA in the amount of $750 for Employee Only coverage and $1,400 for Employee/Dependent coverage. Clario will fund these amounts starting January 1, 2024. Clario will make contributions on each bi-weekly paycheck in equal increments up to the full contribution through the end of the year. You can also contribute to the HSA on a before-tax basis through payroll deductions. For 2024, the annual limit for Employee Only coverage is $4,150 and the annual limit for Employee/Dependent coverage is $8,300. Additionally, an HSA catch-up contribution maximum of $1,000 is allowed for individuals age 55 or older. Any unused amounts remaining in the HSA at the end of the plan year will roll over for you to use for future eligible expenses. Because you can use your account to pay for covered medical, dental and vision out-of-pocket expenses, the HSA provides you with "first dollar coverage." In order to enroll in the HSA, you must be enrolled in Clario's High Deductible Health Plan (HDHP).
The IRS has specific regulations regarding the funds in your HSA:
- Money must be in the Health Savings Account to pay for healthcare expenses.
- Money in the HSA can only be used for qualified medical expenses. You can view the list of qualified medical expenses at www.irs.gov/pub/irs-pdf/p502.pdf. Funds used for non-qualified medical expenses are taxed as income and incur a penalty. (For 2024, the penalty is 20%.)
- If your annual medical costs are greater than the amount in the HSA, you will pay the remaining deductible plus your coinsurance up to your annual out-of-pocket maximum. If your annual medical costs are less than the amount in the HSA, your HSA balance carries over to the next year.
In time, the HSA could accumulate to a level that would cover your entire deductible. If your plan utilization is low and the account continues to carry a balance, you could use the funds to pay for retiree medical coverage.
The HSA is your account. It is funded by Clario, and you may also contribute to the account. Your contributions are deposited into the HSA on a pre-tax basis, and you can change the amount at any time.
- The account is portable; you can continue to use your HSA account even if you leave Clario.
- If you are age 55+, the IRS allows you to deposit up to $1,000 additional "catch-up" contributions into the account on a pre-tax basis.
- If you choose the HDHP/HSA, and you had a Health Care FSA in 2023, funds cannot be contributed to an HSA unless you have a zero balance prior to January 1, 2024. IRS regulations do not permit you to participate in both an HSA and the Health Care FSA.
Are you Eligible?
The HSA is not for everyone. You’re eligible only if you are:
- Enrolled in the High Deductible Health Plan
- Not enrolled in other non-HDHP medical coverage, including Medicare, Medicaid, or Tricare.
- Not a tax dependent.
- Not enrolled in a healthcare Flexible Spending Account (FSA), unless it’s a “limited purpose” FSA for dental and vision expenses.
A Health Savings Account (HSA) is an easy way to pay for healthcare expenses that you have today and save for expenses you may have in the future.
How the High Deductible Health Plan with HSA works
Your HSA account is set up automatically after you enroll.
Four reasons to love an HSA
01
Tax-free. No federal tax on contributions, or state tax in most states. Withdrawals are also tax-free as long as they’re for eligible healthcare expenses.
02
No “use it or lose it.” Your balance rolls over from year to year. You own the account and can continue to use it even if you change medical plans or leave the company.
03
Use it now or later. Use your HSA for healthcare expenses you have today or save it to use in the future.
04
Boosts retirement savings. After you retire, you can use your HSA for healthcare expenses tax-free, or for regular living expenses, taxable but no penalties.
Health Savings Accounts (HSAs) and Flexible Savings Accounts (FSAs) both help you save for qualified medical expenses.
HSAs may offer higher contribution limits and allow you to carry funds year and year but you're only eligible if you're enrolled in a HSA-eligible health plan. FSAs have lower contribution limits and generally you can't carry over funds, but you can be enrolled in any medical plan.
Watch this video to learn more about the difference in spending accounts!
Flexible Spending Account (FSA)
You don’t have to enroll in one of our medical plans to participate in the healthcare FSA. However, if you or your spouse are enrolled in our high deductible health plan , you can only participate in the “limited purpose” FSA for dental and vision expenses.
Set aside healthcare dollars for the coming year
- A healthcare FSA allows you to set aside tax-free money to pay for healthcare expenses you expect to have over the coming year
How a Healthcare FSA works
- You estimate what you and your family’s out-of-pocket costs will be for the coming year. Eligible expenses include office visits, surgery, dental and vision expenses, prescriptions, even eligible drugstore items.
- You can contribute up to $3,200 which is the annual limit set by the IRS. Contributions are deducted from your pay pretax, meaning no federal or state tax on that amount.
- During the year, you can use your FSA debit card to pay for services and products. Withdrawals are tax-free as long as they’re for eligible healthcare expenses.
USE IT OR LOSE IT!
- You may carry over up to $640 in 2024
- You have 90 days to submit claims after 12/31/2024
Debit Card
Employees enrolling in the Health Care FSA will receive an FSA debit card from Baker Tilly, which allows you to access your FSA account to pay for eligible expenses immediately and conveniently at point of service. Be sure to save your receipts!
Dependent Care FSA
Dependent Care FSA—up to $5,000 per year tax-free
A dependent care Flexible Spending Account (FSA) can help families save potentially hundreds of dollars per year on day care. This program is administered by Baker Tilly Vantagen | www.myflexdollars.com
Here's how the Dependent FSA works
You set aside money from your paycheck, before taxes, to pay for work-related day care expenses. Eligible expenses include not only child care, but also before and after school care programs, preschool, and summer day camp for children under age 13. The account can also be used for day care for a spouse or other adult dependent who lives with you and is physically or mentally incapable of self-care.
You can set aside up to $5,000 per household per year. You can pay your dependent care provider directly from your FSA account, or you can submit claims to get reimbursed for eligible dependent care expenses you pay out of pocket.
Savings Example:
By anticipating your family's medical and dependent care costs for the year, you can lower your taxable income and increase your take-home pay (spendable income). Listed here is an example, which is for illustrative purposes only:
Estimate carefully! You can’t change your FSA election amount mid-year unless you experience a qualifying event. Money contributed to an FSA must be used for expenses incurred during the same plan year. Unspent funds will be forfeited.
