Category: For Employers

A Growth Spurt for FSAs with New Stacking Opportunity

by Teri Lowder, Director of Compliance

Since the inception of Health Savings Accounts (HSAs) in 2004, employers, brokers, and members have struggled with how to manage their company’s Flexible Spending Account (FSA) for healthcare along with the new opportunity to add a HSA compatible high deductible health plan coupled with a HSA – and take advantage of all the tax savings these two vehicles allow.

The IRS came out with some very difficult-to-understand “stacking rules” in 2004, pertaining to how this could be accomplished. This left few options other than terminating the healthcare FSA, or amending the plan to allow a limited purpose or post-deductible FSA. Well, relief is in sight! With the ability to rollover $500 at the end of the plan year on the healthcare FSA, additional guidance – favorable to the HSA-  has arrived.

The new FSA $500 carry-over option fits nicely with a HSA. One can move from a full healthcare FSA to a new HSA without violating any IRS rules. Remember, you cannot have a full healthcare FSA and an HSA; the FSA must be limited to dental and vision only, or post-statutory deductible. The guidelines offer the following options:

  • An individual whose healthcare FSA has unused amounts may elect to carry over up to $500 of those funds into a limited purpose or post-deductible FSA, if the employer offers that option. These types of accounts are HSA-compatible, and would not interfere with HSA eligibility, allowing an individual to contribute to a HSA as well as to keep the unused FSA funds.
  • An employer can structure their benefit plan to automatically carry over up to $500 of unused healthcare FSA funds into a limited purpose or post-deductible FSA for individuals who choose an HSA-eligible high deductible health plan for a small additional fee. This also allows the employee eligibility to contribute to an HSA and to keep the unused FSA funds, with the benefit of requiring no action on the employee’s part.
  • An individual with unused healthcare FSA funds may also choose to forfeit those amounts. This will allow an individual with a very small healthcare FSA balance to become HSA-eligible, without any transition to a different type of account.
  • Any individual who is covered by a healthcare FSA, as a result of a carry-over of unused amounts from the prior year, and who does not elect to carry over into a limited purpose or post-deductible FSA, is ineligible to contribute to an HSA for the entire plan year, even if the carried over funds are exhausted before the end of the plan year.

Contact us with any questions, or phone 800.617.4729.

NEWS: Transit Benefits Extended Across San Francisco Bay Area

Since 2009, the city of San Francisco has required businesses with locations within the city to provide an option for commuter benefits to their employees. One of the options available is a Transit Flexible Spending Account (FSA).

Effective September 2014, a new law will require employers with 50 or more employees located in the greater Bay Area to provide commuter benefits to their employees. The Bay Area is defined as including all of Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, and Santa Clara counties, as well as the western portion of Solano County (including Fairfield and points west) and the southern portion of Sonoma County (including Windsor and points south).

To meet this new requirement, the Transit Flexible Spending Account is again an option for employers. In addition, the Transit FSA may be not only the most cost effective – but also the easiest to manage – option. Learn more about Sterling’s Transit & Parking Benefits services or contact us today.

You can find more information on the San Francisco Commuter Benefits Ordinance Overview here and more information on the new law here.

UPDATE 4/2/2014: Employers are now required to register for the Bay Area Commuter Benefits Program and can do so here.

Breakthrough Study Sees 50 Million In HSAs

Editor Note: This article was originally published March 18, 2014 and can be found here.

A new Interpro Publications analysis of national HSA [Health Savings Account] studies over the past 5 years projects that up to 50 million Americans will have an HSA account by 2020 versus 22 million today. This is the first national study of HSAs to make projections of how fast the product is growing. It was conducted in response to multiple requests by employers for HSA performance data during the current contract negotiations for 2015.

“In the first decade after HSAs were created by Congress they grew steadily by about 2 million people per year, but in the past 18 months this has accelerated,” said Interpro Publisher William Boyles.

The health reform law has had little if any impact on growth of HSAs, and in most states HSAs are offered alongside other options with competitive premiums, a December study found.

Learn more about Health Savings Accounts and Sterling Health Services.

For Employers: How to Manage Your COBRA Accounts Online

Sterling Health Services is pleased to offer options for you and your employees to manage your COBRA accounts online. In this video, you will find a step-by-step guide.

Learn more about Sterling and our COBRA services.