HSA Spending: 5 Myths to Debunk That Will Boost Participation

May 8, 2019

A little confidence can go a long way when it comes to decision-making. Health Savings Accounts (HSAs) continue to soar in popularity, which means many employees are participating in these tax-advantaged accounts for the first time.

That’s why it’s important your HSA newcomers understand the benefits of the accounts and how to move from the HSA spending stage (which means they have less than a $1,000 balance) to the saver and, eventually, investor stages. We’ve outlined some HSA spender myths you can clear up to encourage participation. And complete the form below to get two free resources that will help you learn more about HSA trends and how innovation can improve your experience.

Myth #1: Participants Need to Spend Their Funds Within a Specific Plan Year

Flexible Spending Accounts (FSAs) have been around a lot longer than HSAs, which leads to many participants confusing the differences between the two plans. Nearly three-quarters of Americans think HSAs are pretty much the same as Medical FSAs.

The IRS’ use-or-lose rule applies to FSAs, requiring all FSA funds to be spent before the end of the plan year (unless you offer a carryover or grace period). And nearly 70 percent of Americans believe the use-or-lose rule also applies to unused HSA funds, but that’s not the case. All HSA funds carry over from one plan year to the next, which makes it a great tool for long-term planning.

Myth #2: It’s Hard to Become Eligible for an HSA

HSAs are in demand for a number of reasons, including their triple-tax advantage and investment potential. What your employees might not be sure about is how they can become eligible for an HSA.

Eligibility is actually simple! To qualify for an HSA, an employee must simply be enrolled in a High-Deductible Health Plan (HDHP) and have no other ineligible health coverage. They also can’t be enrolled in Medicare and can’t be claimed as a dependent on someone else’s tax return.

Myth #3: If a Participant Has an HSA, They Can’t Have an FSA at the Same Time

It’s true that your employees can’t enroll in a Health Savings Account and a Medical FSA at the same time. But they’re still eligible to participate in Limited Medical FSAs, which gives you and your employees the opportunity to save even more money. Limited FSAs cover a variety of dental, vision and preventive eligible expenses.

Myth #4: Participants Must Request a Distribution When Expense Occurs

You can save money when you purchase eligible expenses with HSA funds. But, at their heart, Health Savings Accounts are savings tools. There’s real incentive to let your balance build up, since any earnings you experience in your HSA (through interest or investments) are tax-free. Your employees can experience peace of mind knowing that they can request distributions from their HSA to pay for an eligible expense at any time, even months or years after the expense has been incurred. That allows your employees to build up their HSAs and only use their funds when they really need them.

Myth #5: Participants Can Only Use Funds on Themselves

HSAs are employee-owned accounts, but that doesn’t mean only employees are covered by HSAs. Your employees can use their funds to cover eligible expenses for:

  • Their spouse
  • Any dependents they claim on their tax returns
  • Any dependents they could have claimed (with certain conditions)

Learn more about the latest buzz surrounding HSAs (and how innovation is transforming these accounts) by completing the form above.

(Please note: Discovery Benefits cannot provide investment advice and encourages its participants to seek guidance from a financial adviser for help with investment decisions.)

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