The latest 2015 IRS updates impact both FSA’s and HSA’s.
Health Savings Account Compatible Health Plans began to gain momentum in 2005. These plans paired a tax favored savings account with a high deductible catastrophic plan. This combination provided tax advantages and lower premiums.
Sadly, these plans may not be around much longer in the individual and small employer market.
Two Reasons Why HSA Are Disappearing
- Once HSA plans began to take root with consumers, carriers quickly realized that they were getting more claims than they expected and after trying to adjust rates (sometimes as much as 20%, 30% & 40% though most were more subtle trying to keep it a viable consumer solution), the plans were retired or priced out so they no longer made financial sense.
- With the addition of health care reform PPACA, many new benefits and regulations have brought the cost of new plans up and any advantage that HSA compatible plans had in terms of premiums have all but slipped away.
HSA plans were intended to reward policy holders for being healthy and making smart health care decisions. Premium increases are removing the soft savings component, leaving only the the ability to save using pretax or tax deductible monies to pay for out of pocket health expenses and save for health needs in retirement. It is a shame really as it was a very good concept but no longer makes sense for carriers and most consumers today.
$500 FSA Rollover Rule Amended by the IRS in October 2013
In October of 2013 the IRS added a $500 rollover amount to Flexible Spending Accounts (remember HSA funds roll over year to year; FSA funds are traditionally use it by the end of the year or lose it). While this is a positive, there is one problem in regards to 2014… the addition happened so late in the year that it provided little time to incorporate in 2014 benefits planning.
Moving into 2015 planning, Ameriflex (one of our TPA partners) listed two solutions that with planning, can make open enrollment smooth for employers and employees.
- They suggest placing a waiver in their FSA enrollment piece that allows employees who plan to have an HSA account in 2016. By including the waiver they are not subject to the new $500 rollover portion and can just participate in the standard FSA for 2015.
We will be making this adjustment with our TPA’s (Third Party Administrators) and online paperless benefits portal for our clients so that employers and employees can be educated and make smart decisions. - Employees that elected the $500 FSA rollover option in 2014 (and those that are considering a health savings account for 2015) will be given the option of two FSA’s for 2015: a general (or standard) FSA and a HSA Compatible FSA plan.
For the next couple of years the one guarantee of health care reform is there will be change and lots of question. If you need general help or would like to set up a HSA Compatible FSA for 2015, contact John Riley at 310-414-9524 or email us [email protected].
