As people navigate their individual health concerns both large and small, employer-sponsored flexible spending accounts (FSA), health savings accounts (HSA), and health reimbursement accounts (HRA) offer a variety of advantages—on top of the tax savings.
While there are differences between how these accounts can be spent or saved, most are defined by the IRS Section 213(d) eligible expense list.
Estimates show FSA holders have forfeited close to $7 billion since 2019.
Many people give up funds simply because they aren’t aware of the true number of items and services they can use with their account. While it is best practice to save HSA dollars for a rainy day, as we near the half-way point for 2022, it’s good employees know what options are at their disposal, so they can make informed healthcare decisions before the deadline makes it for them.
Most consumer account holders are well aware of the option to pay for office visits, hospitalizations, and medications. But, the IRS approved the addition of over-the-counter treatments, feminine care items, and COVID-19 personal protection equipment (PPE) items since 2020, greatly increasing the list of eligible items for these accounts in recent years.
Additionally, the IRS also provided some deadline extension relief for employers to adopt.
Typically, in the spring, communications focus on eligible allergy items medications, inhalers, and nebulizers as they are all covered items. However, as we observe a series of important causes (Disability Awareness Month in March, Autism Acceptance Month in April, and Mental Health Awareness Month in May) we wanted to ensure parents and caregivers had information about the types of support consumer accounts can provide for members and their dependents.
The IRS 502 publication is the key document governing acceptable items and services. Ultimately, the IRS and any subsequent tax audits determine the eligibility of an item or service; however, most administrators of these plans use discretion in approving items that may not be specifically listed but fall into the category of “costs of diagnosis, cure, mitigation, treatment, or prevention of disease…(and) include the costs of equipment, supplies, and diagnostic devices for these purposes.” In this document, there are many allowances for items and even home improvements specifically for physically or mentally disabled dependents.
As you can see, several options are available for those with FSA or (medical) HRA funds and potentially a “good” expenditure for an HSA if the item or service isn’t something you can afford with your current budget.
Consumer accounts help employees achieve greater financial wellness while prioritizing their health. A year-round benefits communication strategy, highlighting those unexpected eligible expenses, helps those who need extra support for their own or for their dependents’ disabilities or medical needs.
FSAs, HSAs, and HRAs are great savings tools for employees to help them supplement their health plans and savings goals. Learn more about selecting a consumer accounts administrator that fits your needs, check out our e-book: Find an Easy Button for Your Consumer-Directed Accounts.