If your company offers a benefit plan including a Health Savings Account (HSA), your education task is tougher by default. Employees tend to get a lot wrong about HSAs, and no wonder: these things are complicated! From questions about eligibility, to confusion over how long HSA funds actually last, employees often have the wrong idea about what they can, and can’t, do with their HSA.
It’s important to open up the communication channels about HSAs and address these misconceptions head-on. To get started, here are five things employees commonly get wrong about HSAs, and what they should know instead.
- HSA Funds Only Last One Year
It’s very easy for employees to mix up HSAs and FSA (Flexible Spending Accounts). While FSAs have a year-end use-by date, HSAs are designed as savings accounts that can last long-term. Here are some tips to share with employees regarding HSA longevity:
- HSA is tax-free money to spend on eligible medical expenses at any time, whether it’s for co-pays, deductibles, or prescriptions.
- If an employee is interested in the tax benefits of HSAs, their funds are best used as an investment account to be used for medical expenses down the line.
- HSA money can be saved and used tax-free to pay for Medicare Part B, Part D, and Medicare Advantage premiums after an employee turns 65, making it an advantageous long-term investment.
- Employees Over 65 Aren’t Eligible
Employees can mix up the eligibility age for Medicare with the ineligibility clause for Medicare users and HSAs. While it’s true that Medicare enrollees cannot contribute to HSAs, just turning 65 doesn’t change anything. If an employee is still working for a large employer who provides health insurance, they can delay enrolling in Medicare until after they’ve stopped received employer-provided benefits.
- There’s a Time Limit on Paying for Medical Expenses
Medical expenses often get paid over extended periods of time, and HSA rules reflect that. Even if a medical bill arrives long after the treatment occurred, HSA funds can still be used to pay for it. There’s no time limit set for use of funds. However, employees should be reminded to keep their receipts to track those expenses.
- HSAs Are Just Savings Accounts
You’d think that since they’re literally called “savings accounts” that would be the limit of their power. But HSA money can also be invested for long-term growth. While not all HSA administrators allow for investments, many do and offer low-cost mutual fund investment through major firms such as Fidelity. Employees wishing to save for the long term and cover Medicare premiums should be aware of this option.
- HSAs Don’t Follow A Job Change
This is a key myth to bust with employees: HSAs do stay open and the funds remain available even if an employee leaves the company where they opened it. Employees can generally leave the HSA with its current administrator, roll it over to a new one, or even continue contributing to it if they enroll in a new HSA-eligible plan.
Communicating the facts about HSAs and their potential benefits can be a real help your employees as they seek the right healthcare coverage plan for their individual situation. It can be tough for employees to make the switch to a high-deductible health insurance plan with an HSA — the numbers can look daunting and the requirements can be confusing. Side-by-side comparisons can help, and to provide additional assistance, a decision-making tool which helps employees weigh their typical healthcare needs and risk tolerance against premiums and deductibles can also be invaluable.
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