If you or your employees have a flexible spending account (FSA) you may be scrambling to spend that money before it expires. That’s one of the main differences in an FSA v. HSA v. ancillary benefits package. Your FSA expires at year-end. (Although, in some cases, that deadline is extended to mid-March.)
Whatever benefits package you have, healthcare is expensive. When you factor in the costs or co-pays of prescription medicines, doctor’s visit co-pays, not to mention vision and dental costs or co-pays, plus the actual cost of healthcare coverage, the average person spent $10,345 in healthcare in 2016. FSA, HSA, or ancillary benefits packages can help defray some of those costs.
When comparing FSA v. HSA v. ancillary benefits, each has advantages for certain people. If you’re an employer interested in offering the most robust benefits package to your employees, combine ancillary benefits that include dental benefits and vision benefits with an FSA to pay other costs, not ordinarily covered by insurance, with pre-tax dollars.
When you’re looking at the differences in FSA v. HSA v. ancillary benefits, one of the biggest drawbacks to an FSA is it expires at year’s end.
Let’s sort through the other differences in FSA v. HSA v. ancillary benefits to better understand employee benefits available. As a broker, you’ll be armed with the knowledge to guide your customers toward the best ancillary benefits package to improve employee loyalty and morale.
An FSA, or flexible spending account, is a pre-tax savings account you can use to pay for a variety of expenses related to health and wellness and, in some cases, dependent care.
The employer withdraws a set amount of money, pre-tax, and provides employees with a debit card to purchase any items or services covered by the FSA. The list includes a number of surprising items, including co-pays, prescription and over-the-counter medicine, childcare, and even items such as bandages and sunscreen.
If you don’t spend the money in the account by the deadline (typically December 31 or March 15), you could lose it, although some plans let you roll up to $500 into the next year.
An HSA, or a health savings account, is often confused with an FSA. But a Health Savings Account is available only to individuals enrolled in a high-deductible health plan (HDHP). The idea is that the health savings plan can help cover the deductible cost with pre-tax dollars. HSA money can also pay health-related expenses not covered by your insurance, such as vision or dental costs.
Unlike an FSA, you can deduct money from your HSA for other reasons, but you will pay tax on that money, including an additional 20 percent tax penalty.
If you’ve read this far, you understand why an FSA or HSA is not always the best option employers can provide to their workers.
Ancillary benefits, including vision and dental benefits, work like any other insurance plan. Employees pay the premium with pre-tax money deducted from their paychecks and the insurance benefits pay for things like check-ups, corrective lenses, or dental work. In some cases, the employee might have to pay a co-pay.
Most ancillary benefits are completely employee-funded, which means the employer has no added costs. Ancillary benefits are enticing to employees because it’s like money in the bank with no risks involved.
Advantages of Ancillary Benefits:
Brokers, if your customers ask you, “Which is better: FSA v. HSA v. ancillary benefits?” we encourage you to share this post with them and guide them toward the best conclusion. Flex spending accounts have their place, but as people rush to spend the money in their account this month, it might be a good time to show your customers a better, less frustrating way to pay for common dental and vision expenses.
You can add an ancillary benefits package to any enriched DBL account when the policy renews this winter. Let the DBL Center help as your white-glove, back-office team to help the process go smoothly.
by Dawn Allcot