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The Clock is Ticking: Have Your Employees Maximized Their FSA/HSA Funds?

As 2024 draws to a close, it’s a crucial time to remind employees to review and utilize any remaining balances in their pre-funded accounts, such as Flexible Spending Accounts (FSAs) or Health Savings Accounts (HSAs). While HSAs typically roll over, many FSAs are subject to a “use-it-or-lose-it” rule, making year-end a critical moment for employees to make the most of their hard-earned benefits.

Flexible Spending Accounts (FSA): Avoid Forfeiting Hard-Earned Dollars

FSAs allow employees to set aside pre-tax dollars to pay for eligible medical expenses throughout the year. However, unused FSA funds are generally forfeited at the end of the plan year, plus any applicable grace period. This can lead to significant losses if employees don’t act in time.

Between 2019 and 2020, 44% to 48% of workers forfeited some FSA funds, losing an average of $339 to $408 per year, according to an Employee Benefits Research Institute (EBRI) analysis. Fortunately, some employers offer a carry-over option for FSAs, allowing participants to roll over a portion of unused funds to the following year. For 2024, this amount is capped at $640. However, this option varies by employer, so employees should confirm the specifics of their plan.

Health Savings Accounts (HSA): Triple Tax Benefits for Long-Term Savings

For employees enrolled in High Deductible Health Plans (HDHPs), HSAs offer a tax-advantaged way to cover medical expenses. Contributions, earnings, and qualified withdrawals are all tax-free, providing significant savings potential.

HSAs can be used for a variety of medical expenses, from meeting HDHP deductibles to paying for dental and vision care. Unlike FSAs, unused HSA funds roll over year after year, making these accounts a valuable tool for both short-term and long-term healthcare planning. Despite these advantages, awareness gaps persist. A survey found that nearly 30% of employees were unaware that HSA contributions are tax-exempt.

Encouraging Smart Healthcare Consumerism Year-Round

How can your organization empower employees to make the most of their FSA and HSA funds? Education is key. By providing year-round guidance on benefits utilization and cost comparison, employers can help employees become informed healthcare consumers.

Encouraging employees to research pricing, compare options, and strategically use their benefits accounts not only reduces out-of-pocket costs but also fosters a sense of control over their healthcare journey. As the year-end deadline approaches, employers should take proactive steps to remind and support employees in maximizing their benefits.

Let’s help employees end the year on a high note—fully prepared and confident in their healthcare choices. After all, informed decisions today can lead to healthier futures tomorrow. For more information on how you can help your organization's employees make the most out of their benefits before the year ends, reach out to your Keenan team.