This year’s open enrollment season just may be one of the most essential—and confusing—in recent history. The myriad legislative changes that were introduced for flexible spending accounts (FSAs) and health savings accounts (HSAs) in 2020 due to COVID-19 were designed to give employers and employees more flexibility and protection. While these changes were critically important and beneficial, they now have the potential to create even more confusion for employees as they try to sort out 2021 deadlines while making decisions about 2022 benefits.
As HR teams begin communicating with employees about open enrollment, keep in mind these three things employees need to know about FSAs and HSAs. Not only will this help your workforce make sound decisions about elections and end-of-year spending, but it could also increase engagement and participation with benefits while reducing the number of questions your benefits team fields in the coming months.
Your Deadline May Not Be Your Deadline
The COVID-19 pandemic prompted swift changes by the Internal Revenue Service (IRS) and Congress that affected FSA deadlines and contribution rules. The Consolidated Appropriations Act of 2021 gave employers the choice to temporarily eliminate or extend the FSA spending deadline for their benefits plan year. In addition, employers were given the option to allow employees to roll over their entire unused account balance to the upcoming plan year rather than the $550 maximum rollover option.
Why does this matter? Because if employees do not understand their deadlines, they could lose even more of their FSA funds than the estimated $400 million they currently lose.
Eligibility Has Changed—A Lot.
With thousands of options, FSA and HSA users can save on a wide variety of services and products, from copays to breast pumps, contacts, COVID-19 masks, over-the-counter medications, tampons, and much more. Some of the high-demand products were made eligible for the first time because of the pandemic and concerted efforts by companies like Health-E Commerce to expand eligibility rules. More specifically:
- The Coronavirus (COVID-19) Aid, Relief, and Economic Security (CARES) Act made feminine care and over-the-counter medications (without a prescription) eligible.
- IRS announcement 2021-7 made personal protective equipment (PPE) to help prevent the spread of COVID-19 (like face masks and hand sanitizer) eligible.
- To help your employees plan their contributions for next year and spend down remaining FSA funds this year, encourage them to use a comprehensive, online Eligibility List to learn about and map out everyday health spending needs.
Significant Financial Benefits to Enrolling
A common (and recurring) question that consumers ask of Health-E Commerce is “Why should I enroll in an FSA or HSA?” Benefits teams should take the time during open enrollment to communicate the differences between these account types, as well as the tax advantages of electing and contributing to an FSA or HSA and using those funds for everyday health needs. Other common questions your benefits team can proactively answer for employees include:
- What’s the difference between an FSA and an HSA?
- How much can/should I contribute?
- How can I use my funds?
- What is my deadline?
As COVID-19 and its variants continue to affect people around the world, employers will continue to play a critical role in protecting the health and well-being of their workforce as we head into 2022. That starts with educating employees on what their benefits are and how to use them so employees are equipped to make the best decisions possible for their personal situations. In the process, you could also help employees protect their hard-earned healthcare dollars by reducing or eliminating end-of-year forfeitures with FSAs.
Rachel Rouleau is Vice President of Compliance for Health-E Commerce, parent brand of online marketplaces FSAstore.com, HSAstore.com, WellDeservedHealth.com, and CaringMill.com — all of which offer a 100% eligible shopping experience for FSA and HSA account holders and an extensive library of account education content and tools.
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