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concurrent-fsa

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FSA myths debunked

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what happens to FSA when I quit my job

using-benefits-wisely

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FSA expenses tax deductible

Limited Purpose FSA

Lively can simplify your understanding of limited purpose FSA. Here is what you need to know about limited purpose FSA, healthcare, benefits, retirement, and of course HSAs.

FSA Eligible Items

Lively can simplify your understanding of FSA eligible items. Here is what you need to know about FSA eligible items, healthcare, benefits, retirement, and of course HSAs.

We examine the top ten myths about Flexible Spending Accounts so that you can get accurate answers to your FSA questions.

10 FSA Myths Debunked

Lively can simplify your understanding of Flexible Spending Account. Here is what you need to know about FSAs, healthcare, benefits, retirement, and of course HSAs.

Flexible Spending Account Articles

Lauren Hargrave is a writer from San Francisco who focuses on technology, finance and wellness. She follows comedians like most people follow bands and believes an outdoor sweat session can cure almost any bad mood. She’s also been writing her first novel for so long, her mom doesn’t ask about it anymore.

Lauren Hargrave

Employee Benefits

Lively can simplify your understanding of employee benefits. Here is what you need to know about employee benefits, healthcare, retirement, and of course HSAs.

Employee benefits

Lively can simplify your understanding of FSA rules in these articles.

Flexible Spending Account Rules Articles

FSA (Flexible Spending Account)

Lively can simplify your understanding of FSAs. Here is what you need to know about FSAs, healthcare, benefits, retirement, and of course HSAs.

Lively can simplify your understanding of benefits in these articles.

Benefits Articles

Learn how to best use your previous year’s FSA balance through “dual” or concurrent FSAs when you have a run-out or grace period.

How to Best Use Your Concurrent FSA Funds

Lively can simplify your understanding of dependent care FSA. Here is what you need to know about dependent care FSA, healthcare, benefits, retirement, and of course HSAs.

Dependent Care FSA

Are you planning to leave your job or did you recently quit? Here is what happens to your Flexible Spending Account (FSA).

What Happens to my FSA When I Quit my Job? | Lively

Flexible Spending Account Rules

Lively can simplify your understanding of benefits. Here is what you need to know about healthcare, benefits, retirement, and of course HSAs.

Benefits articles

Flexible Spending Account

Lively can simplify your understanding of Flexible Spending Accounts. Here is what you need to know about flexible spending acconts, healthcare, benefits, retirement, and of course HSAs.

Flexible Spending Accounts

Benefits

Flexible Spending Accounts, including for healthcare and dependent care, offer many benefits for employers including FICA tax savings and employee attraction and retention.

Why Employers Should Offer an FSA

An FSA enables employees to deduct the amount they and their employers pay for premiums and contributions from their taxes. We explain more.

Are Flexible Spending Account Deductions Pre-Tax?

The primary benefit to employees that buy health insurance and contribute money to a [Flexible Spending Account (FSA)](https://livelyme.com/fsa/) is their ability to access [medical care and dependent care](https://livelyme.com/blog/what-is-an-fsa/) without taking on a huge financial burden. Pre-tax deductions (aka tax-deductible expenses) are a big part of the financial benefit of health insurance and FSAs. 

The benefits to employers that offer health insurance and FSAs include: healthy, productive employees, complying with the Affordable Care Act (ACA) and the ability to [deduct](https://www.irs.gov/forms-pubs/about-publication-535) the amount both they and employees pay for premiums and contribute to their FSAs. There are special rules regarding highly compensated and key employees, so make sure to review [IRS guidelines](https://www.irs.gov/publications/p15b) before writing your cafeteria plan.

## The quick answer

Yes, the money employees contribute to their FSAs is deducted from their paychecks before income taxes are assessed. That means contributions are made [“pre-tax” or are “tax-deductible”](https://www.irs.gov/forms-pubs/about-publication-969), and aren’t included in employees’ effective gross income (EGI) for income tax purposes.

Since employees’ contributions are taken before any taxes are assessed, they are also deducted from the payroll taxes employers must pay for contributing employees. If employers choose to make contributions to employees’ FSAs, these contributions are tax-deductible for employers and will not be counted as part of employees’ EGI.

## What are pre-tax deductions

Pre-tax deductions refer to the money employees can choose to deduct from their paycheck to pay for a range of benefits that include (but are not limited to): 
- Health insurance premiums
- FSAs
- [Health savings accounts (HSAs)](https://livelyme.com/guides/hsa-guide/)
- 401ks 

Employers subtract the appropriate amount from each paycheck to pay for the employees’ chosen benefits, and then assess the appropriate income, medicare, social security and payroll taxes. Since the deductions are subtracted from each paycheck prior to taxes being assessed, they are referred to as “pre-tax deductions”.

## What are post-tax deductions

Post-tax deductions refer to money employees can choose to have their employers direct from their paychecks, after taxes have been subtracted, to pay for benefits that aren’t eligible for a pre-tax deduction. An example of a post-tax deduction is: a contribution an employee makes to their Roth IRA or an employer-sponsored emergency savings account.

## Which one is better?

When trying to decide whether or not pre or post-tax is better, your gut instinct might be: pre-tax is always better. When it comes to health insurance and FSAs, we tend to agree with you. If you can set aside money in order to pay for medical and dependent care, and [transportation costs](https://livelyme.com/blog/what-are-commuter-benefits/), pre-tax, you can end up saving up to 37% on those costs, depending on your tax bracket.

But that doesn’t mean you should dismiss post-tax deductible benefits. For instance, when it comes to retirement benefits, there are two types: pre-tax deductible and post-tax deductible. A [401k](https://livelyme.com/blog/401k-vs-hsa/) is an example of a pre-tax deductible retirement benefit. You don’t pay taxes on contributions in the year you make them, but you do pay taxes on the distributions you take in retirement. Conversely, while Roth IRAs are post-tax deductible, meaning you pay income taxes on your contributions in the year you make them, you don’t pay taxes on the distributions you take in retirement. Contributing to a retirement savings account is beneficial, no matter when you receive the tax benefit.

## How does it work?

[FSAs can be paired with any health plan](https://livelyme.com/guides/flexible-spending-account-fsa/), which makes it a benefit that’s easy for all employees to take advantage of. If an employee chooses to contribute to an FSA during open enrollment, they will designate how much they want to contribute for the year (up to the annual limit set by the IRS). The employer will then deduct the appropriate amount from each paycheck. But here’s the important part: the employee is eligible to withdraw their entire allocated amount for the year as soon as the account is active. Even if they haven’t deposited the entire amount yet. 

So, if they have an expensive and/or unexpected procedure mid-plan year (or even at the beginning), they will have access to their full annual amount to pay for their qualified out-of-pocket expenses.

Many FSA administrators give plan participants access to debit, credit and stored value cards linked to their account so they can use their FSA to pay for expenses at the point of purchase.

If employees don’t use all of their FSA money by the end of the plan year, employers have three options: they can force employees to forfeit what remains, they can give employees a 2 ½ month grace period during which they can use their remaining money, or they can allow a $570 rollover to the following year. If the employee takes advantage of any [grace period or rollover](https://livelyme.com/blog/fsa-rollover-versus-grace-period/), it will not affect their annual limit for the following year.

## Choosing an FSA provider

- Employers looking for an FSA provider should consider the following factors: Cost
- Ease of use for both employer and employees
- Features it offers like debit cards, account management via a smartphone app
- Customer support for plan participants

Most [FSA providers](https://livelyme.com/fsa/) will charge a per participant monthly fee in addition to set-up and other administrative fees. They also offer varying levels of support and have different processes for reimbursement and account usage. To find the right FSA for your company, you will have to find the FSA provider that offers the easiest plan for employees to use at a cost that works for you.

## Get started with Lively

If you’re looking for an affordable FSA that’s easy for employers to navigate and employees to use, [reach out to Lively](https://livelyme.com/fsa/) today.

Are Flexible Spending Account Deductions Pre-Tax? 

If you’ve researched health plans recently, you know there are many tax-advantaged savings accounts that can help you pay for qualified expenses. They all have different benefits, rules and requirements, different acronyms and different use-cases, so it’s understandable if you’re having a hard time keeping everything straight. In this post, we’re debunking the top 10 FSA myths to help you in your navigation efforts. The myths we’re covering are:

1. I don’t go to the doctor often enough for an FSA
2. I can’t use FSA for over the counter medication
3. I can still use my FSA card even if there’s no balance
4. I can remove money From My FSA at an ATM
5. My employer will spend my unused FSA balance for anything they want
6. HSA and FSA are the same
7. FSA balances never roll over
8. You need to save all your receipts
9. I probably can’t afford an FSA
10. I can keep my FSA if I leave my employer

## Myth 1: I don’t go to the doctor often enough for an FSA

It’s true, using your FSA contributions to pay for copays and coinsurance for medical care is a common reason people maintain this type of account. But it’s not the only use-case for an FSA. You can use your FSA contributions to pay for prescriptions like birth control, insulin, and blood pressure medication, as well as everyday supplies like sunscreen and band-aids, and medicine cabinet essentials like Children’s Motrin, thermometers, and decongestant drops. You can even buy menstrual care products, prenatal vitamins, and breast pumps with your FSA. 

You can also use your FSA to pay for expenses for you, your spouse, and any dependents you have. So even if you’re only going to the doctor for your annual physical and maybe once or twice a year for an illness-related appointment, chances are you’re using many products in the course of your everyday life that qualify as an approved FSA expense. Curious about what exactly qualifies as an approved FSA expense? Check out our searchable list of [eligible expenses](https://livelyme.com/whats-eligible/), and this [IRS publication](https://www.irs.gov/pub/irs-pdf/p969.pdf). 

## Myth 2: I need a prescription to use my FSA for over the counter medication

This myth used to be true. But the CARES Act removed the need for a physician’s prescription in order to use FSA money for over the counter medication. The type of over-the-counter medications you can use your FSA for without a prescription include:
- Children’s Mortin and Tylenol
- Adult Tylenol and Ibuprofen
- Cold and Allergy relief
- Digestive relief like Alka Seltzer and Imodium
- Healing ointments like those used to treat eczema

For a complete list visit search our list of [qualified FSA expenses](https://livelyme.com/whats-eligible/). 

## Myth 3: I can still use my FSA card if there’s no balance

This myth likely stems from the way FSAs function. During [open enrollment](https://livelyme.com/blog/five-tips-to-prepare-for-open-enrollment/) you decide how much you want to contribute to your FSA for the year and that total amount is available to you at the beginning of your plan year. Your employer will still subtract the appropriate amount from each paycheck, but your account will be fully funded on day one, regardless of how many payments you’ve made. 

However, you only have this amount available to you. So if you spend your entire annual allotment in January, and your account says you have a balance of $0, you won’t have any more FSA money available to you even though your employer is still withdrawing your contributions from your paychecks. 

## Myth 4: I can remove money from my FSA at an ATM

Your FSA company might provide you with a debit card linked to your account and if they do, that’s great! It means you can pay for your FSA-qualified purchases at the point of sale. But it doesn’t mean you can withdraw cash from your account. If you do pay for an expense with your personal account, you will have to submit the appropriate documentation to your FSA company so they can approve and issue a reimbursement.

## Myth 5: My employer will spend my unused FSA balance for whatever they want

If you have a balance remaining in your FSA account at the end of your plan year, your employer has the choice to offer one of the following remedies: 
1. A [grace period](https://livelyme.com/blog/fsa-rollover-versus-grace-period/) in which to use your contributions (the IRS allows up to 2 ½ months). 
2. The ability to [roll over](https://livelyme.com/blog/flexible-spending-account-fsa-rollover/) up to $550 of unused funds to the following plan year. 

Regardless of what they offer, if you have a balance remaining in your FSA that you can’t use, your employer can’t just use it to buy printer paper. The IRS actually has pretty strict rules about the use of forfeited FSA contributions: they must be used for the benefit of plan participants. So employers can use them for plan administrative costs or they can distribute unused contributions evenly into employees’ FSA accounts the following year.

## Myth 6: HSAs and FSAs are the same

While [Health Savings Accounts (HSAs) and healthcare FSAs](https://livelyme.com/blog/hsas-vs-fsas/) have similar functions: to offer a tax-free way to pay for qualified medical expenses, the way they function is different and they have different eligibility requirements. 

[HSAs are owned by the individual](https://livelyme.com/guides/hsa-guide/) so you never lose access to your account. There is no “use it or lose it” rule so your HSA balance rolls over from year to year giving you a vehicle to save for the long term, be it future health costs or retirement. In order to contribute to an HSA you must be currently enrolled in a [High-Deductible Health Plan (HDHP)](https://livelyme.com/guides/hdhp/). But you can always use the contributions you’ve made previously, regardless of the type of health plan you have. 

Conversely, [FSAs are owned by your employer](https://livelyme.com/guides/flexible-spending-account-fsa/) so you only have access to your account for as long as you’re employed with that company. But if you leave the company, you might be able to maintain access to your FSA through COBRA. FSAs do have a “use it or lose it” rule, meaning you could forfeit whatever balance remains at the end of the plan year unless your employer allows for a rollover of funds or offers a grace period in which to use your money. Health FSAs are compatible with any type of health plan, giving you flexibility in terms of insurance coverage.

They also have different annual contribution limits. The current contribution limits can be found here:
- [HSA contribution limits](https://livelyme.com/blog/hsa-contribution-limits/)
- [FSA contribution limits](https://livelyme.com/blog/fsa-contribution-limits/)

## Myth 7: FSA balances never roll over

As we said above, there are instances when your FSA balance can roll over. The IRS allows your employer to offer one (not both) of the following remedies for end-of-year unused balances:
- The ability for employees to roll over up to $550 of unused contributions to the following plan year, or
- A 2 ½ month grace period in which to use any unused contributions.

If your employer allows you to [roll over your unused funds](https://livelyme.com/blog/flexible-spending-account-fsa-rollover/), it won’t affect your contribution limit for the following year. If you end up forfeiting any money at the end of your plan year, don’t worry, your employer has to use that money for your benefit. That could mean covering plan administrative costs or putting a little extra money in employees’ accounts during the following plan year.

## Myth 8: You need to save all of your receipts

Most [FSA providers](https://livelyme.com/fsa/) will issue you a debit card so you can pay for your expenses at the point purchase. That means no receipts are necessary because you’re not submitting anything for reimbursement. However, keeping your receipts is always a good idea, especially if the IRS asks you to [substantiate your purchase](https://livelyme.com/blog/substantiate-fsa/). In addition, if you do end up paying for a qualified expense with your personal card, save that receipt because your FSA administrator might require it to issue a reimbursement. 

## Myth 9: I probably can’t afford an FSA

At first, the idea of allocating money away from your take-home pay might not seem doable. But keep in mind, this money isn’t subject to income taxes. So whatever you spend this money on (and as we said before, there’s quite a lot that qualifies as an FSA-approved expense), you could save up to 37% on that expense, depending on your tax bracket. If you were going to make these purchases anyways, it would make sense to do it with tax-free money.

## Myth 10: I can keep my FSA if I leave my employer

Unfortunately, in most cases, this isn’t true. Your employer owns your FSA so when you leave, you forfeit any unused balance. You might be able to maintain access to your FSA through COBRA so if you are planning to leave your company, contact your HR Department to ask about this possibility.

[FSAs are a great too](https://livelyme.com/guides/flexible-spending-account-fsa/)l you can use to save money tax-free for qualified health-related purchases. They do come with rules and restrictions so make sure you understand how they function so you can use these accounts to their full potential. If you have questions about how your specific FSA functions, reach out to your HR Department or [FSA administrator](https://livelyme.com/fsa/). 


Debunking the Top 10 FSA Myths

Compiling a benefits package that’s both cost-effective and beneficial to your employees is one of the most important endeavors a business can take on. Yes, there’s a cost to offering your employees adequate and supportive benefits. But there’s also a cost to not offering said benefits. Both to your talent pool and to your bottom line.

By offering your employees a [Healthcare, Dependent Care, and/or Limited Purpose Flexible Spending Account (FSA)](https://livelyme.com/fsa/), you can help them pay for the rising costs of life so they’re more likely to show up for work and be happier while they’re there. This can help save your business money in terms of less time lost to productivity and employee absences, as well as lowering wage-related costs for employees who participate. Offering an FSA is a win-win for employers and employees alike.

## What is an FSA?

An FSA is a savings account into which employees deposit tax-free money directly from their paycheck. They can then withdraw this money to pay for expenses related to their specific account. [Deposits to Healthcare FSAs](https://livelyme.com/blog/what-is-a-healthcare-fsa/) can be spent on health and medical-related expenses, [deposits to Dependant Care FSAs](https://livelyme.com/blog/dependent-care-fsa-dcfsa-work/) can be spent on childcare and adult day care expenses for dependents that allow the employee to work, and deposits to [commuter benefits accounts](https://livelyme.com/blog/what-are-commuter-benefits/) can be spent on commute-related expenses like bus fares.

Both employees and employers can [contribute to FSAs up to the IRS annual limit](https://livelyme.com/blog/fsa-contribution-limits/). Any unused funds left over in the accounts are forfeited at the end of the year unless the employer chooses to allow employees to [either roll over up to $550 to the following year, or a 2.5 month grace period](https://livelyme.com/blog/fsa-rollover-versus-grace-period/) in which to use the funds. Any rolled over amount will not affect the employees’ annual limit that following year.

## What are the benefits for employers?

The benefits to employers for offering any of the above-mentioned FSAs are 
financial as well as cultural. By allowing employees to divert a portion of their taxable income to a tax-free account, employers save money directly on wage-related costs. They also have another recruiting tool at their disposal as well as a low-cost way to support current employees.

### FICA tax savings

Since employees’ FSA contributions are deposited before taxes are assessed, employers save payroll taxes on that money. The average employee contribution to a Healthcare FSA is $1,350/year. If you apply the 7.65% payroll tax to that amount, employers save $103/participating employee/year in FICA taxes. The average cost of offering an FSA is $60/participating employee/year, so businesses net $43/participating employee/year. The net profit to employers that offer Dependent Care FSAs is even higher at $185/participating employee/year.

Employers also save money on other wage-related expenses like unemployment and worker’s compensation insurance.

### Reduced costs due to lost productivity

The sicker your employees and less access they have to reliable (and affordable) childcare, the more it will cost you in terms of lost productivity. American businesses lose an estimated [$12.7 billion a year](https://strongnation.s3.amazonaws.com/documents/602/83bb2275-ce07-4d74-bcee-ff6178daf6bd.pdf?1547054862&inline;%20filename=%22Want%20to%20Grow%20the%20Economy?%20Fix%20the%20Child%20Care%20Crisis.pdf%22) because of employees’ child care challenges and in 2019 alone, sick days cost U.S. businesses [$575 billion](https://www.healthleadersmedia.com/finance/employees-poor-health-cost-employers-575b-2019).

By providing employees with a [tax-free way to pay for health and child care expenses](https://livelyme.com/guides/flexible-spending-account-fsa/), you help make that care more affordable. If the expenses are more affordable, employees are more likely to seek medical care when they need it, which helps prevent a mild illness from turning into something more serious, and they’re more likely to have child care that’s reliable. Both of which help ensure they reliably show up to work. 

### Attract top talent

As employees quit their jobs in record numbers, employers are competing to hire top talent, and benefits are a key consideration for perspective employees. According to [Lively’s Wellness and Wealth](https://livelyme.com/blog/2022-wellness-wealth-report/) report, 70% of job seekers consider benefits as the #1 consideration in taking a job along with a competitive salary. In addition, 76% of large businesses and 23% of small businesses already offer employees an FSA. And So if you’re not already offering an FSA to your current and prospective employees, you’re recruiting at a disadvantage.

### Boost employee retention

Employees who feel supported are more likely to be happier at work and less likely to leave. But beyond general happiness, women especially are more likely to stay in the workforce if they have affordable access to childcare. Currently making up [46.6% of the U.S. workforce](https://www.zippia.com/advice/what-percentage-of-the-workforce-is-female/) (which has [fallen from 50.4%](https://time.com/5766787/women-workforce/) of the workforce just 3 years ago), women are more likely to take on unpaid child care duties that can restrict their ability to rise in their careers or even work at all ([32% of working women](https://www.census.gov/library/stories/2020/05/the-choices-working-mothers-make.html) are mothers to children under 5).

Providing families a more affordable way to pay for child care helps keep your female talent working and rising through the ranks at your company. This not only helps company culture but can also help foster growth, improve your products and more.

## How do I choose an FSA provider that is best for my company?

The [best FSA provider for your company](https://livelyme.com/fsa/) is the one that can meet the needs of most of your employees at an affordable rate. If your employee demographic skews younger, you’ll want one that offers a modern approach. This includes: debit cards for POS purchases, an app for easy account management, and other high tech features. If your employee demographic skews older, you’ll want an FSA provider that offers comprehensive employee education and customer support. The ideal FSA provider offers all of the above.

## Get started with Lively

To find out how Lively can help you compile a comprehensive benefits package that lowers your yearly employment costs and helps you recruit and retain talent, [reach out today](https://livelyme.com/fsa/)! 


Reasons Why You Should Offer Your Employees a Flexible Spending Account

Employers offer [different types of Flexible Spending Accounts (FSAs)](https://livelyme.com/fsa/) to help employees pay for medical expenses, child care, and dental and vision costs. And if you’ve been enjoying these benefits while employed, you might be worried about what happens to them once you leave your job. Because [FSAs operate on a “use it or lose it” policy](https://livelyme.com/guides/flexible-spending-account-fsa/) in most cases, it's important to know what happens to your benefits if you leave youf job.

## The relationship between your FSA and your job

Although you are the account holder of your FSA, you don’t actually own it. Your employer does. That means that while you (and perhaps your employer) deposit money into your account, that money is yours to use during the plan year and while you’re employed at that company. But anything you don’t use is forfeited either at the end of the plan year or termination of your employment (whichever comes first).

If you’re still working for your employer at the end of your plan year and you have money left over in your FSA, your employer has the option to offer you [either a 2.5 month grace period in which to use your balance or the ability to rollover](https://livelyme.com/blog/fsa-rollover-versus-grace-period/) up to $500 into the next plan year. If your employer offers either of these options and you take advantage of them, it won’t affect your annual contribution limit for the following year.

## What happens to the unused money?

Any unused money in your FSA goes back to your employer once you leave your job. If you have a healthcare FSA, you could have the option to continue access to your funds through COBRA. But you can’t use your FSA contributions to pay for health insurance premiums either through COBRA or in the private market.

Two other important details of COBRA extended FSAs are:
- Any contributions you make will be with after-tax money.
- You will be assessed a 2% administration fee on all contributions.

## Can you plan to use your FSA money before you quit?

If you have a date in mind that you plan to leave your job, you can make sure you use your remaining FSA funds before you do so. Even if you give two weeks’ notice, some employers will ask that the day you quit be your last day at work (depending on the nature of your job). So it’s best to plan to use your FSA money before you actually give notice.

Here are some ways to put your account to good use before you lose it:
- Schedule an elective procedure you’ve been putting off either for you or for one of your dependents. Just keep in mind you can’t use your FSA to pay for something in the future, so the costs will need to be incurred prior to quitting.
- Stock up on first aid and other [eligible supplies](https://livelyme.com/whats-eligible/), like sunscreen.
- If you take birth control or another prescription regularly, ask your doctor about the possibility of buying multiple months’ supply at once.

## How the IRS relaxed rules during Covid-19

Since Covid-19 disrupted the health system, distribution channels and just about everything else, Congress passed the Taxpayer Certainty and Disaster Tax Relief Act of 2020 which directed the [IRS to relax some of its rules](https://www.irs.gov/newsroom/new-law-provides-additional-flexibility-for-health-fsas-and-dependent-care-assistance-programs) around FSAs for 2021 and 2022. The new guidance gives employers greater flexibility in how much they can allow their employees to rollover and how long of a grace period they can provide.  Employers can also allow account holders to submit prior year expenses for reimbursement beyond the normal “Tax Day” deadline.

Here are the areas of flexibility the new rules provide:
- Flexibility for the carryover of unused amounts;
- Flexibility to extend the permissible period for incurring claims for plan years ending in 2020 and 2021;
- Flexibility to adopt a special rule regarding post-termination reimbursements from health FSAs; and
- Flexibility for a special claims period and carryover rule for dependent care assistance programs when a dependent "ages out" during the COVID-19 public health emergency.

Employers don’t have to offer employees this increased flexibility in using their FSA money, but they have the option to do so.

## Consider an HSA if eligible

One of the major differences between FSAs and [Health Savings Accounts](https://livelyme.com/guides/hsa-guide/) (HSAs) is that you, as the account holder, own your HSA instead of your employer. In addition, the funds never expire so you always have access to your money. You might consider opening one if you meet the following qualifications:  
- Be aged between 18 and 65 years and not considered a dependent on someone else’s tax returns;
- [Maintain a High Deductible Health Plan (HDHP)](https://livelyme.com/guides/hdhp/) as your only health insurance; and
- Not eligible for Medicare.

## Get started with Lively today

If you’re planning to leave your job in the near future, a Lively HSA can help you begin to grow your healthcare and retirement nest egg and you can bring it with you to your next job, provided you have a qualifying health plan.

Have questions about how it works? [Reach out to us](https://livelyme.com/) today!


What Happens to your Flexible Spending Account When You Lose or Quit Your Job?

Remembering all the rules that govern the healthcare and insurance landscape is hard enough, but now you’ve received a notice that you have a “concurrent flexible spending accounts” or dual [FSAs](https://livelyme.com/fsa/). What does that mean? And how are you supposed to use them so you don’t forfeit money (or forfeit the least amount of money possible)? 

Relax. We’ll tell you everything you need to kno

## What are concurrent FSAs?

A simple definition is: concurrent FSAs are when you have two active FSAs from different plan years at the same time. There are a few reasons you could have concurrent FSAs: 
1. Your employer allows a grace period period in which to use the previous year’s contributions.
2. You have two separate FSAs with two separate employers.

## If your employer allows an FSA grace period

The IRS allows employers to give employees up to 2.5 months at the end of the plan year in which to spend any unused [FSA contributions](https://livelyme.com/guides/flexible-spending-account-fsa/) from the previous year. This is called a [grace period](https://livelyme.com/blog/fsa-rollover-versus-grace-period/) (which is different than a “run-out” period, more on that later). It’s important to note that offering a grace period is optional for employers, and many factors go into the decision of whether or not to offer one. But if your employer does offer a grace period, that’s great news! We’ll tell you how to use it.

1. Know how much you have available. Your entire remaining FSA balance from the previous plan year is available to you to use, so check your account.
2. Know the timeframe in which you have to use it. The IRS rules state employers can give employees up to 2.5 months after the end of the plan year as a grace period in which to use their remaining balance. Most plans end on December 31st and start over on January 1st. If that’s the case with your FSA, then you have between January 1st and March 15th of the following plan year in which to use your balance. During this timeframe you will have what’s called “concurrent FSAs”. You will have the previous year’s FSA that you’re using during the grace period and your current year’s FSA.
3. Know [what expenses](https://livelyme.com/whats-eligible/) you can use it for. 
4. Follow your FSA administrator’s process for grace period expenditures. You might be able to use your FSA debit card or you might have to submit receipts for reimbursement, either way, reach out to your HR department or FSA administrator to find out the appropriate process. That way your expenses get allocated to the correct account.

## What’s a FSA “run-out period”?

Your FSA run-out period is additional time to reimburse yourself for expenses incurred during the previous plan year. Your employer gets to choose how long they give you (the most common timeframe is 90 days), during which you want to submit all of the previous year’s receipts you either forgot about or didn’t have time to get reimbursed.

## What if I have a run-out period and a grace period?

Lucky you! Since both the run-out period and the grace period apply to the same pot of money (your remaining FSA balance from the previous plan year), you need to know how much you have available for each type of expenses. 
- Step 1: Organize your previous year’s receipts. What’s the total of the unreimbursed expenses vs. the account remaining balance?
- Step 2: Submit your previous year’s receipts for reimbursement before the run-out deadline.
- Step 3: If you have any of your previous year’s balance left over, plan which current year expenses for which you will use that balance. Reminder: you can only use your FSA money for past or current expenses, not future expenses. 
- Step 4: Submit this year’s expenses for reimbursement before the grace period ends.

## What if I have a different FSA provider this year?

If your FSA provider changes at the start of the new plan year, your run-out and grace periods are applicable to the account you had with the old FSA provider. So you’ll want to submit any expenses tied to that account with that administrator. 

## What if I have two FSAs with different employers?

If you have concurrent FSAs because you are participating in two separate accounts with two different employers, then you can use both accounts as you would if you had one FSA. But you can only reimburse for a health expense once. So you should prioritize which account you want to use first. For instance, if one employer gives you a grace period or allows you to rollover unused funds to the following plan year, and the other doesn't, you should use the FSA without any rollover or grace periods first.

## What if both my spouse and I have an FSA?

This isn’t really what we mean by “concurrent FSAs” but, it could be taken that way since you and your spouse can pay for each other’s expenses using both accounts. So it’s like one of you has two FSAs at the same time. If you and your spouse each have an FSA, then you should approach it the same way as the scenario above. You can’t reimburse for the same expense twice so you’ll want to prioritize which account to use first.

Having concurrent FSAs is a great thing as long as you can prioritize your eligible expenses appropriately to make the most of your accounts. Remember that many of the decisions regarding run-out and grace periods are dependent on your employer. So if you have any questions about how your specific FSA(s) run, reach out to your HR department or your FSA administrator(s). 


What to do When You Have Concurrent, or Dual, FSA Accounts

It’s that time of year again, when 80% of Americans spend less than an hour researching one of the most important decisions they’ll make this year: their health coverage.  Unfortunately, this often leaves many people under-insured or without the right coverage for their needs.  To prevent this from happening to you, we have a few tips that’ll help you make the right decisions for you and your family this [open enrollment season](https://livelyme.com/guides/open-enrollment/).

## What is open enrollment?

[Open enrollment](https://livelyme.com/guides/open-enrollment/), simply put, is [a period of time, usually two-to-six weeks](https://livelyme.com/blog/why-do-open-enrollment-periods-exist-for-health-insurance/), when people can enroll in health insurance and other benefits for the next year. It most often occurs in the fall, but some employers have specific open enrollment periods, so if you are not sure when your company's open enrollment takes place, it's always a good idea to ask. Outside of open enrollment, you often are not able to change your health insurance coverage without a "qualifying life event," such as having a baby, getting married, or losing other health coverage.

## Common mistakes

Because researching healthcare options can feel like a chore, during open enrollment, roughly 90% of Americans choose the health plan they had the previous year, despite any changes in health. This lack of research and [preparation for open enrollment](https://livelyme.com/blog/five-tips-to-prepare-for-open-enrollment/) can leave them under-insured. In addition, individuals often don't look into how their plans may have changed, even if it has the same name, and often neglect the full range of benefits their insurance plan and employer offers. 

## Six tips to help you determine your benefits package

These simple, actionable tips will help you select the best benefits for you and your family.

## Review your family’s recent health history

To make sure you’re buying the right coverage for your family’s needs, you need to know what those needs are. Take a look at what your family’s medical needs have been over the last two years. Assess:
- How did your current plan support you?  
- Where did it fall short?  
Then ask yourself if you or a family member has been recently diagnosed with a condition that will require ongoing treatment.  If so, you’ll want to take that treatment into account when choosing a plan.

## Assess recent or near-future life changes

Are you [getting married](https://livelyme.com/blog/tag/are-married-getting-married/)? [Pregnant, wanting to get pregnant, or adtopting a child](https://livelyme.com/blog/life-events-that-can-change-your-healthcare-costs/)? Are you planning to move away from your preferred doctor and want to make sure you have access to another health provider you like? To make the right decision for your health coverage, you’ll want to anticipate how these future changes will affect your healthcare needs.

## Check your current plan

Plan names can stay the same but the benefits included within them could change. So even if you keep the same plan as you had last year, it could end up costing you more or less depending on what changes your employer or the plan provider made. Possible changes to look for are:

- Coverage levels
- Pricing
- Types of products offered
- New providers for existing products
- New products from existing providers

## See if premiums and deductibles have changed

Sometimes companies change the amount to which they’ll contribute to their employees’ health plans. If your company has changed its contribution levels, this will likely affect the amount you pay in premiums and deductibles. It might also affect the attractiveness of HSAs and FSAs in order to help with those deductibles.

## Do your own research

Your company will likely put out official communication regarding your benefits options and reviewing its resources is a good place to start.  But it’s not a place to end.  Many companies provide resources to help consumers make the right choices when it comes to their benefits. By doing your own research, you’re more likely to get a neutral third party assessment of your plan options, and you might even find better benefits in the marketplace than your company is offering.

If you do find better plans that you think your company should consider, try sending them to your Human Resources (HR) Department. When HR knows what employees need, they can make better choices in terms of what benefits they offer in the future.

## Check your company’s wellness initiatives

Companies have realized that a healthier workforce is a more productive workforce. To incentivize healthy behavior, many have started programs that reward such behavior with increased benefits like a [greater HSA](https://livelyme.com/guides/hsa-guide/) or 401(k) contribution, lower premiums, or other perks like reimbursement for gym memberships. Check with your HR Department to see if you might qualify for any increased benefits.

Navigating the healthcare labyrinth can feel like a job in and of itself.  But if you follow our six tips, you’re more likely to make the right decisions for your family and could end up saving money over the course of the year.

## Learn more with Lively

Lively is a modern, health savings account (HSA) that helps you save for routine and unexpected healthcare expenses and plan for retirement. To learn more, check out our [resources on healthcare and financial wellness](https://livelyme.com/resources/), including our [open enrollment guide](https://livelyme.com/guides/open-enrollment/), or see if an HSA is a [fit for you](https://livelyme.com/features/).

Select the right healthcare insurance benefits for your family. Picture shows doctor doing a checkup on a child with his mother holding him.

child and mother at a family doctor visit 

80% of Americans spend less than an hour researching their health coverage. Follow these tips so you can make the right decisions for you and your family.

Open Enrollment Tips for Employees | Lively

Open Enrollment Tips for Employees

Familiar with the tax-saving benefits of a health savings account (HSA), and wondering how you can extend those benefits to your family? While an HSA is owned by one person, there is a way to tap into those HSA funds for the rest of your family. Discover how, and the differences between a family HSA and individual HSA.

## Your plan is dependent on your health care coverage

To be [eligible to contribute to an HSA](https://livelyme.com/hsa-guide#qualifying-for-an-hsa-account), you must enroll in an eligible [High-Deductible Health Plan](https://livelyme.com/blog/what-is-a-high-deductible-health-plan-hdhp/) (HDHP). The IRS sets annual minium deductibles for individual and family health care coverage, as well as annual out-of-pocket maximums, and usually update those annually based on inflation.

## What is a Family HSA?

![what-is-family-hsa](//images.ctfassets.net/6j8y907dne6i/2AyTsX5zWqJw75Sf8dPxjn/27b942e17c0757642c853d85db8abfe4/what-is-family-hsa.jpg)

While often referred to as a “Family HSA” account, there is actually no such thing. 

Each HSA is owned by one person. But family coverage under a qualifying HDHP allows you to use your HSA to pay for [qualifying medical expenses](https://livelyme.com/whats-eligible/) for yourself and your family. The type of health plan (individual or family) you’re enrolled in decides how much you can contribute to your HSA account in one calendar year. 

If you are enrolled in an individual qualifying high-deductible health plan, you will only be able to [contribute the individual maximum contribution](https://livelyme.com/blog/hsa-contribution-limits/) amount set annually by the IRS. If you and your family are covered by the same qualifying health plan, then your contribution limit is increased to the annual contribution limit set for families. One rule: To contribute the maximum family contribution limit, none of the family members can be claimed on another person’s [tax return](https://www.irs.gov/irb/2004-02_IRB). 

## Annual HSA Contribution Limits

![hsa annual contribution limit](//images.ctfassets.net/6j8y907dne6i/3mripn4V4Q51N7FfM26AEf/283c4bf5ded5d8aefbf448ea77e7b317/hsa_annual_contribution_limit.jpg)

If you are enrolled in an individual qualifying high-deductible health plan, you will only be able to [contribute the individual maximum contribution](https://livelyme.com/blog/hsa-contribution-limits/) amount set annually by the IRS. If you and your family are covered by the same qualifying health plan, then your contribution limit is increased to the [annual contribution limit set for families](https://livelyme.com/blog/hsa-contribution-limits/). 

One rule: To contribute the maximum family contribution limit, none of the family members can be claimed on another person’s [tax return](https://www.irs.gov/irb/2004-02_IRB). 

If enrolled in an HSA-eligible HDHP, and at least 55 years old—or will be 55 any time in the calendar year—you can make an extra $1,000 contribution. This is a [“Catch-Up” Contribution](https://livelyme.com/blog/what-is-an-hsa-catch-up-contribution/). 

## Real-life examples
### Individual health plan with HSA

During open enrollment, James chooses an HDHP because he wants to take advantage of his employer’s contributions to an HSA. James is not currently married and doesn’t have any dependents, so his health plan will cover only him.

As an individual, James can contribute up to the individual annual [HSA contribution limit](https://livelyme.com/blog/hsa-contribution-limits/) without a penalty.

### Family Health Plan with HSA
Fast forward a few years, and James is now married with two children. James is at a different company, but still has his HSA and an HDHP that covers him and his family.

James is now eligible to contribute the family limit to his HSA, and while the contribution limits often change annually, he knows he'll be able to contribute up the the annual family [HSA contribution limit](https://livelyme.com/blog/hsa-contribution-limits/) within one calendar year.

## Can I Have a Joint HSA With My Spouse?
![no-joint-hsa-with-spouse](//images.ctfassets.net/6j8y907dne6i/4JyBNCLJUiCy6ietwyTrGn/588c28e6b0352282f87b6d0c6643cfe9/no-joint-hsa-with-spouse.jpg)

*Short answer:* No. An HSA is owned by one person. 

Yet, there is a way for you and your spouse to have HSAs of your own. If you and your spouse are covered under the same HDHP, you can each open your own HSA and contribute separately. But, the amount you and your spouse contribute, combined, cannot exceed the contribution limit for a family plan. 

### Real-life examples:

#### Family HSA contribution limit with two accounts

Jack and Diane are married and covered under Jack’s high-deductible health plan. Diane wants to take advantage of her employer’s HSA contributions, so she decides to open up an HSA of her own. 

However, Jack and Diane’s total, combined contributions cannot exceed the family contribution limit set for the IRS that year. That means that whatever Jack contributes to his HSA and whatever Diane contributes to her HSA added together needs less or equal to the annual contribution limit. 

Jack and Diane can use these funds to pay for the [qualified medical expenses](https://livelyme.com/whats-eligible/) of those covered under their health plan, including each other.

#### Family HSA contribution limit with one account

The other option is to have the entire amount of the HSA in one account holder’s name. In this case, Jack opts not to contribute anything into his HSA for the year, and Diane and her employer will be able to contribute the entire amount into her account.

## The benefits of an HSA

![hsa-retirement-benefits](//images.ctfassets.net/6j8y907dne6i/1okT5ICuYiKx6c18Oof9dK/0e331b4135f6588ed8df49e0f2a24bdd/hsa-retirement-benefits.jpg)

There are four primary [benefits of having an HSA](https://livelyme.com/blog/what-are-the-benefits-of-an-health-savings-account/).

1. __Three levels of tax savings__. Pre-tax or tax-deductible contributions. Tax-free interest, and investment earnings. And tax-free withdrawals when used for qualifying medical expenses.
2. __Portability__. HSAs aren’t tied to your employer. If you decide to move to a different company or retire, your HSA stays yours. The funds added to your account stay there until you choose to withdraw or roll it over; like a 401(k).
3. __ A safety net in the event of a health-related emergency__. An HSA helps you save for the unknown. It can be used for unexpected health care expenses or health insurance if you’re between jobs. An HSA covers all qualified medical expenses, even after a change of plans or providers.
4. __ Flexibility in retirement__. When you turn 65, your HSA can be used for non-health-related expenses without penalties; like a 401(k), or IRA.

An HSA is a great safety net in the event of a health-related emergency. And with [options to invest](https://livelyme.com/blog/can-i-invest-my-hsa-money/), choosing to open an HSA is one of the best financial choices you can make for you and your family. 

To learn more, or to open an HSA, [get in touch](https://livelyme.com/features/) with us at Lively.


family hsa and individual hsa contributions are dependent on health care coverage

family-hsa-vs-individual-hsa

Learn the differences between a Family HSA vs Individual HSA. And how to extend HSA benefits to your entire family. 

Family HSA vs Individual: What’s the Difference?

What’s the Difference between a Family and an Individual Health Savings Account?

Dividing your assets, such as 401(k)s and Health Savings Accounts (HSAs) is a central piece of negotiating a divorce settlement. If you receive health insurance through your spouse’s employer, you want to carefully consider whether it makes sense to stay on your partner’s health insurance after you divorce.

## Tips for navigating health insurance when divorcing

### You can pay for health insurance through an ex’s health insurance.

If your health insurance was through your partner’s workplace plan, you may be able to stay on the plan for up to 36 months. The federal COBRA legislation requires any firm or organization with at least 20 employees to offer health insurance to the divorced partner. If your soon-to-be-ex works for a smaller employer, you may be eligible for extended COBRA coverage through a state-run plan.

But there’s a big expensive catch to COBRA health insurance coverage: Once you are divorced, the employer no longer will subsidize the premium cost for the non-employee. 

You will be required to pay the full cost. According to the Kaiser Family Foundation, the average monthly premium for single coverage through a group plan was nearly $7,200 in 2019.  And the employer is also allowed to tack on an additional 2% annual fee to cover administrative charges.

### Check out your employer’s health insurance. 

If you were on your partner’s plan because it was more robust or cost-effective than the plan offered by your employer, time to circle back to your workplace plan. It may now be more cost-effective than staying on your ex’s plan through COBRA. 

Getting divorced is considered a [qualifying life event](https://livelyme.com/life-events-that-can-change-your-healthcare-costs), so you’ll be able to enroll for health insurance outside of open enrollment. 

### Compare COBRA coverage to an ACA-marketplace plan.

Before you finalize your divorce, spend some time pricing out purchasing your own health insurance through the ACA marketplace. Depending on your income you may be eligible for subsidies. You can start your search at the [healthcare.gov](https://www.healthcare.gov/) website.

### Include the cost of paying for health insurance in your divorce negotiations. 

It’s likely that whatever health insurance solution you land on, the premium is going to be a sizable line-item cost in your monthly budget. You should factor that into negotiations for assets. And keep in mind that if there is a family HSA account that has a sizable balance, that is a valuable asset to also bring into your discussions. 

### Consider a legal separation as a temporary step. 

If you are legally separated, but not divorced, you may be able to stay on a spouse’s plan, but it varies by employer and insurer.

### Sort out who pays for insurance coverage of the kids.

This is obviously a key part of your divorce negotiation. If you opt for joint custody and you both assume responsibility for health insurance, the spouse whose birthday falls earlier in the calendar year will have the “primary” insurance for the children. If there isn’t joint custody, the custodial parent typically assumes responsibility for health insurance for children. If the custodial parent remarries, and doesn’t have health insurance, the responsibility can fall to the custodial parent’s new spouse. If that isn’t an option the non-custodial parent will be required to step in and provide health insurance coverage.

Given the complexity of divorce, including health insurance coverage. consulting with a lawyer experienced in divorce law is a smart move to ensure that everyone in the family is covered. 



stay-on-insurance-divorce

Divorce is a complicated process - and it doesn't help that your health insurance gets tied up into the process as well. We detail some information that you will need to know regarding your healthcare if you are getting divorced from your partner.

How Long Can I Stay on My Partner's Insurance After a Divorce? 

<p>Helping employees understand the benefits of an HSA (like any new HSA user), takes time and resources. In order to make the HSA education and engagement process easier for employers and employees, we have outlined our best practices.</p>
<p></p>
<p>Our employee HSA education guide will help you get HSA strategies&nbsp;in place from day 1 so employees can take advantage of the&nbsp;<a href="https://livelyme.com/what-are-the-benefits-of-an-health-savings-account/">triple-tax benefits</a>&nbsp;immediately.</p>
<h2>HSA Employee Education Tips</h2>
<p>Opening, establishing and contributing to an HSA should be easy.&nbsp;It shouldn&#8217;t be rocket science, that&#8217;s at least what we think at Lively! Here is what every employee needs to know to get started with their new HSA:</p>
<ol>
<li>Confirm&nbsp;<a href="https://livelyme.com/hsa-eligibility-details/">HSA-Eligibility</a></li>
<li>Understand&nbsp;<a href="https://livelyme.com/2018-hsa-contributions/">Contributions&nbsp;Limits</a></li>
<li><a href="https://livelyme.com/add-1-hsa-day-1/">Open and Establish their HSA</a></li>
<li>How to&nbsp;<a href="https://livelyme.com/hsa-rollovers-and-transfers/">Rollover or&nbsp;Transfer</a>&nbsp;an Existing HSA</li>
<li><a href="https://livelyme.com/set-forget-hsa/">Automating HSA Contributions</a></li>
<li>Use an HSA&nbsp;<a href="https://livelyme.com/hsa-debit-card/">Debit Card</a>&nbsp;for Eligible&nbsp;Purchases</li>
<li>Review&nbsp;<a href="https://livelyme.com/can-i-invest-my-hsa-money/">HSA Investment</a>&nbsp;Options</li>
</ol>
<p>No employer health or financial situation is the same. Once employees have opened&nbsp;an HSA, customizing&nbsp;HSA strategies can help each and every eligible employee take advantage of their HSA benefits. This will better ensure success (and renewal). Let&#8217;s look at two likely employee HSA scenarios:</p>
<ul>
<li><b>HSA Saver</b>&nbsp;&#8211; HSA savers are more focused on the long-term savings value of an HSA. They can invest their funds or simply take advantage of FDIC-Insured interest bearing&nbsp;HSA accounts. Thereby taking advantage of compound interest and save HSA funds for future health costs.</li>
<li><b>HSA Spender</b>&nbsp;&#8211; These employees are using pre-tax HSA funds to pay for expected and unexpected health costs. They can use their dedicated HSA funds to reduce their out-of-pocket health expense liability.</li>
</ul>
<p>Many HSA account holders are a mix of both. Helping employees save for health costs today and plan for anticipated health costs well into retirement will only increase HSA adoption.</p>
<h4>Employee Engagement and Support</h4>
<p>Things come up. Employees get stuck. We get it. We have&nbsp;been through it ourselves. Making sure on-demand support options are available for employees is crucial in this process. It saves everyone time. Employee HSA education is an ongoing process. So we created an on-demand resource center to help &#8211; from an&nbsp;<a href="http://support.livelyme.com/">HSA FAQs</a>&nbsp;to&nbsp;<a href="https://livelyme.com/calculator/">HSA saving calculators</a>. We backed it all up with a dedicated&nbsp;customer&nbsp;service team to answer employee&nbsp;questions via&nbsp;<a href="mailto:support@livelyme.com">email,</a>&nbsp;<a href="tel:1-888-576-4837">phone</a>&nbsp;or chat (via our website).</p>
<h4>Don&#8217;t&nbsp;Forget! Talk About Retirement &amp; Health Costs</h4>
<p>Many employees are stuck on a year-to-year&nbsp;ferris&nbsp;wheel when it comes to health insurance and cost planning. Employees are forced into rising yearly health insurance premiums and out-of-pocket costs. Not planning for health costs in retirement &#8211; which are&nbsp;<a href="https://www.cnbc.com/2017/11/24/health-care-costs-in-retirement-can-top-275000.html">expected to exceed&nbsp;$275,000 per couple</a>&nbsp;&#8211; can be a financial mistake. Employees can use their HSA to plan and save for retirement. In fact, an HSA might be the&nbsp;<a href="https://livelyme.com/stealth-ira/">new stealth IRA</a>.</p>
<p>Opening an HSA is easy (at least at Lively). Helping employees understand the value of an HSA should be too. Use this employee HSA guide&nbsp;to fast-track benefits education to save employees time.</p>

Employee-HSA-Guide.jpg

Helping employees understand the benefits of an HSA (like any new HSA users), takes time and resources. In order to make the HSA education and engagement process easier for employers and employees, we have outlined our best practices.

Employee HSA Guide

Lively Blog

What is an HSA?

How Do I Qualify for an HSA?

How Does a Health Savings Account Work?

How Much Can I Contribute to My HSA?

What Can I Use a Health Savings Account For?

It’s a fact. The cost to be - and stay - healthy rises each year. And even the comprehensive  (expensive) health insurance plans are covering less for the cost of care. So what’s a person to do? Open an HSA.

A Health Savings Account (HSA) allows you to set aside money on a pre-tax basis to pay for qualified medical expenses. You, your employer, and even friends and family can contribute money to your HSA. The contributions are tax-deductible and never expire. So you can save them for a rainy day, retirement, or to help pay for an expensive procedure you have coming up.

## How do I qualify for an HSA?

To qualify for opening and contributing to an HSA, you must meet these criteria:

1. You must enroll in a [High-Deductible Health Plan](https://livelyme.com/guides/hdhp/) (HDHP). 
2. You have no other health coverage except what is permitted under what the IRS defines as "[other health coverage](https://www.irs.gov/publications/p969#en_US_2022_publink1000204039)."
3. You must not be enrolled in Medicare.
4. You can’t contribute to a [Health Flexible Spending Account](https://livelyme.com/blog/what-is-a-healthcare-fsa/) (HFSA). But you can contribute to a [Dependent Care](https://livelyme.com/blog/dependent-care-fsa-dcfsa-work/) (DCFSA) or [Limited-Purpose FSA](https://livelyme.com/blog/what-is-a-limited-purpose-fsa/) (LPFSA) and contribute to a health savings account in the same year.
5. You can't be claimed as a dependent on someone else's tax return.

## How to enroll and use an HSA

![how-does-health-savings-account-work](//images.ctfassets.net/6j8y907dne6i/3zynuAFE9SoOfJRy8MT7lO/d0078bf16189f8141aeeaa5b7ae1da54/how-does-health-savings-account-work.jpg)

### Step 1: Elect a high-deductible health plan during open enrollment.

![Infographic High Deductible Health Plan plus HSA how you save](//images.contentful.com/6j8y907dne6i/5lcCeg9CA7pfdV9jfLrUVG/86661d1a0187b5c1f8408c52a5247e9f/Infographic_HealthPlan_plus_HSA_HORIZ.png)

### Step 2: Open a health savings account and decide how much you want to contribute. 

To enroll in an employer-sponsored health savings account, you'll likely open your HSA during open enrollment. Let your employer know how much you want to contribute for the year up to the [IRS contribution limit](https://livelyme.com/blog/hsa-contribution-limits/), which are different whether you are an individual, family, and/or over 55. Your employer may begin making payroll deductions each month.

Your employer may choose to contribute to your HSA. But they’re not required to. If they do, those contributions will count toward your annual limit. But will remain tax-free to you.

![Infographic how money goes into your HSA](//images.contentful.com/6j8y907dne6i/5qd6V0TtmmbBHgwTvMuTHh/f26f8ca95dd89fa960804adbe80616d6/Infographic_Money_In_HORIZ.png)

Maybe your employer doesn’t offer a health savings account. Or it’s outside of open enrollment and you want to get started on saving for your health care costs today. You can open an HSA with a financial institution in the private market.

With this route, you will make arrangements to fund your HSA with the account administrator. And your contributions will be deducted from your gross taxable income when you pay taxes for that year.

### Step 3: Use your funds for qualified medical expenses.

To use your funds, your account administrator may provide a debit card so you can pay for your health care costs at the point of sale. Or you will pay for costs upfront and submit documentation for [reimbursement](https://livelyme.com/blog/hsa-reimbursement-rules/). Your withdrawals are tax-free as long as you use the money to pay for qualified medical expenses. If you use your money for something else, the money you withdrew will be subject to income tax plus a 20% penalty.

![HSA infographic how money comes out of HSA](//images.ctfassets.net/6j8y907dne6i/4ASMR4GJB8EGJoXPtGWqLj/d6a2d0cf2f363b57abaa037e62026a55/Infographic_Money_Out_HORIZ.png)

__Additional health savings account details:__

- You own your account so you can take it with you from employer-to-employer (or employer to unemployed). 
- Even if you choose a health insurance plan that isn’t an HDHP, you can still use past contributions for out-of-pocket, qualified medical expenses. But you won’t be able to contribute to your account.
- Employer contributions are tax-free.
- If you’re under the age of 65, you must use your contributions for qualified medical expenses.
- Once you reach 65, you can no longer contribute to your account. But you can use your savings to pay for whatever you’d like.  
- An HSA offers triple tax savings: pre-tax or tax-deductible contributions, tax-free interest and investment earnings, and tax-free distributions when used for qualified medical expenses.

## What can I use my funds for?

![hsa-eligible-expenses](//images.ctfassets.net/6j8y907dne6i/42Oe00AuAcE2fs9KFkcmHS/b30013424117eb2a8c42b7c42b094e5c/hsa-eligible-expenses.jpg)

HSA-eligible expenses include (but are not limited to):

- Deductibles
- Copays
- Coinsurance
- Out-of-pocket costs related to diagnostic services like x-rays and blood tests
- Prescriptions
- Quality of life enhancers like air purifiers (with a letter of medical need)
- Medical supplies like band-aids and crutches
- Alternative medicine treatments like acupuncture

This list is not exhaustive. For a comprehensive list of IRS-qualified medical expenses check [“What’s Eligible."](https://livelyme.com/whats-eligible/)

## What happens if I switch employers?

You get to keep your account and every dollar you’ve saved. Although you may not be able to continue contributing to that same account. 

If your new employer uses a different health savings account administrator, you will have two options. [Roll the HSA](https://livelyme.com/blog/rolling-over-your-hsa/) from your previous employer into the new account or maintain two different HSAs. One account from your previous employer - from which you can withdraw but not contribute. And one from your current employer into which you can start contributing.

For more details about your specific situation, contact your HR department.

## Where can I sign up for a Health Savings Account?

![sign-up-lively-hsa](//images.ctfassets.net/6j8y907dne6i/4sUTWDriKFMgGBrIHxeyH9/a36ee79d497005f21445666727ab98e6/sign-up-lively-hsa.jpg)

You can [sign up for an HSA](https://secure.livelyme.com/signup/start) in two places. Through your employer, if it offers this benefit. Or through a financial institution in the private market.

Here, at [Lively](https://livelyme.com/), we offer a private-market HSA that allows you to put your contributions into mutual funds or other investments. That way you can access an even greater benefit: growing your money with the market.

As you can see, there are many ways an HSA can help you save money for health care expenses and retirement. A health savings account can also offer security should you lose your health insurance coverage for a period of time. For more information about HSAs, check out our [HSA Guide](https://livelyme.com/guides/hsa-guide/).


what-is-hsa

Learn the basics of an HSA, including the qualifications for opening and contributing to an account, how much you can contribute, how to use your account, and more!

HSA Basics: Qualifications, Contributions, and More | Lively

The Basics of HSAs: Qualifications, Uses, and More

On May 16, 2023 the [Internal Revenue Service announced the HSA contribution limits for 2024](https://www.irs.gov/pub/irs-drop/rp-23-23.pdf). These are set each year and adjusted for inflation, and 2023 limits are significantly higher than those set for 2023.

For 2024 HSA-eligible account holders are allowed to contribute: 

- $4,150 for individual coverage
- $8,300 for family coverage

This is a $300 increase for individuals and a $550 increase for families from the [2023 HSA contribution limits](https://www.irs.gov/pub/irs-drop/rp-22-24.pdf).

The 2023 HSA contribution limits are: 
- $3,850 for individual coverage
- $7,750 for family coverage

If you are 55 years or older, you’re still eligible to contribute an extra [$1,000 catch-up contribution](https://livelyme.com/blog/what-is-an-hsa-catch-up-contribution/).

To be eligible for an HSA, your health plan has to meet the following IRS criteria for a [high-deductible health plan (HDHP)](https://livelyme.com/blog/what-is-a-high-deductible-health-plan-hdhp/):

__For 2024:__
- Must have a minimum deductible of $1,600 for individual coverage, and $3,200 for family coverage
- Out-of-pocket maximums cannot exceed $8,050 for individual coverage and $16,100 for family coverage

__For 2023: __
- Must have a minimum deductible of $1,500 for individual coverage, and $3,000 for family coverage
- Out-of-pocket maximums cannot exceed $7,500 for individual coverage and $15,000 for family coverage

Annual minimum deductibles have increased $100 for individuals and $200 for families from 2023, and out-of-pocket limits have increased by $550 for individuals and $1,100 for families. 

You can [use our HSA contribution calculator](https://livelyme.com/hsa-contribution-calculator/) to help figure out your optmial monthly contribution.

## How HSAs work

A [Health Savings Account (HSA)](https://livelyme.com/guides/hsa-guide/) is a tax-advantaged savings account. Think of it as a 401(k) for healthcare. In order to [contribute to an HSA](https://livelyme.com/partners/how-to-open-an-hsa/), you must have a high-deductible health plan. 

HSAs allow for tax-deductible contributions, tax-free interest and tax-free withdrawals for qualified medical expenses. This means the money you contribute to an HSA can be used tax-free on health expenses such as prescriptions, copays, and more. This can help you minimize your health care costs throughout the year while saving for the future.

If you choose a high-deductible health insurance plan through an employer, you are likely eligible to contribute to an HSA. If this is the case, your employer can also help to contribute to your HSA before taxes, so you can receive extra savings until you reach the annual contribution limit. 

The main benefit of an HSA? It’s 100% yours. If you leave your job, you can take your HSA (and the funds that you contributed to it) with you. This is different from a [Flexible Spending Account (FSA)](https://livelyme.com/guides/flexible-spending-account-fsa/) in which the funds will get returned back to your employer. 

There are three different tax advantages you can get from your HSA:

- Tax-free contributions
- Tax-free spending for all [qualified medical expenses](https://livelyme.com/whats-eligible/)
- Tax-free growth

The result is the most tax-advantaged account on the market. 

To get started, see if you are [eligible for an HSA](https://livelyme.com/blog/hsa-eligibility-requirements/) or [sign-up](https://secure.livelyme.com/signup/start) for a free account. 


piggy bank on pink background

The IRS announced the 2024 HSA maximum contribution limits. $4,150 for individuals and $8,300 for families. Sign up for your health savings account with Lively today!

2023 and 2024 HSA Contribution Limits

2023 and 2024 HSA Maximum Contribution Limits

The ground shifted under employers as the pandemic caused many workers to reevaluate their values, their jobs, the companies they worked for and even their careers. We likely won’t know the full impact of the pandemic and The Great Resignation for years to come but even with continued economic uncertainty and a potential recession, one thing is clear: employees are demanding more from their employers. In fact, a study from Lively found that in the past year [84% of HR leaders increased benefits](https://livelyme.com/blog/report-employee-benefits-pulse-check/) to attract and retain employees facing a high employee turnover rate.

At the same time, employers have fewer resources and need to keep their budgets in-check while retaining and recruiting talent. They need benefits solutions that offer a bigger bang for the buck, and [80% of HR leaders](https://livelyme.com/blog/report-employee-benefits-pulse-check/) say that competitive financial benefits are more important than they were a year ago. That’s where Health Savings Accounts (HSAs) come in.

## A brief overview

[HSAs are personal savings accounts](https://livelyme.com/guides/hsa-guide/) participants can use to save pre-tax money to pay for [qualified medical expenses](https://livelyme.com/whats-eligible/). Money is contributed to the account tax-free, any interest earned on the money is tax-free and distributions made on eligible expenses are tax-free as well (that’s why HSAs are called triple tax-advantaged accounts). Account owners can choose to [invest their savings](https://livelyme.com/features/invest-your-lively-hsa/) so that they grow at the rate of the market or to keep it in a savings account earning interest. The money never expires and rolls over from year-to-year.

Another beneficial feature is that anyone can contribute to an employee’s HSA. That includes the employee themselves, their employer, their friends and their family. The only caveat is that the total of all contributions must not exceed the [IRS’s annual contribution limit](https://livelyme.com/blog/hsa-contribution-limits/) for that year.

These features make HSAs a good tool to help employees save for future medical expenses and [even retirement](https://livelyme.com/blog/hsas-for-retirement/) as the account functions as a traditional retirement account once the participant turns 65. The only exception is when the account holder uses their HSA to pay for qualified medical expenses as these distributions stay tax-free, even in retirement.

There are a few eligibility requirements for employees to contribute to an HSA:
1. They must be actively enrolled in a [High Deductible Health Plan (HDHP)](https://livelyme.com/guides/hdhp/) and that must be their only health insurance coverage.
2. They must be under the age of 65.
3. They must not qualify for Medicare.
4. They can’t be counted as a dependent on someone else’s taxes.

For these reasons, HSAs are popular among employees. And what’s even better is the same features that are popular, are also beneficial to employers. This makes HSAs a valuable benefit to offer. Let’s take a deeper look.

## Financial benefits

One of the qualities that makes HSAs so valuable to employers is the ability of this account type to lower their cost per employee. HSAs can lower companies' costs directly by encouraging employees to choose more affordable health insurance plans as well as indirectly by lowering the companies’ FICA obligation.

### Reduce the cost of health premiums

The financial benefits HSAs offer employers include the ability to reign in the cost of health insurance. In a recent survey, employers said they expected their spending on medical care to [rise 6% in 2023](https://www.fiercehealthcare.com/payers/employers-expect-healthcare-costs-rise-next-3-years#:~:text=U.S.%20employers%20expect%20healthcare%20costs,be%20over%20budget%20this%20year.), after increasing 5% in 2022. If you’re looking to contain the costs of your benefits package while still offering quality health insurance, consider an HDHP/HSA combination.

According to the [Kaiser Family Foundation (KFF)](https://www.kff.org/report-section/ehbs-2022-section-8-high-deductible-health-plans-with-savings-option/#:~:text=Five%20percent%20of%20covered%20workers,HSA%2Dqualified%20HDHPs%20in%202022), the average annual premium in 2022 for a family HDHP was $21,079, of which employers paid $15,891. Compare this to the average annual premium of $23,003 for a non-HDHP health plan, of which employers paid $16,893 and you can see that offering this type of plan can help you save $1,000 per employee that enrolls. 

A great way to incentivize employees to [enroll in the HDHP](https://livelyme.com/guides/hdhp/) is to pair it with an HSA and, if your budget allows, to offer an employer contribution. You can structure this contribution as a match or a flat amount for all employees who are actively contributing to their HSAs.

### Lower your company’s tax obligation

Since employee contributions to their HSAs are taken pre-tax, their gross taxable income is reduced. The less gross taxable income they have in their paycheck, the less FICA taxes you, as the employer, pays. This is why it’s important to not only offer an HSA, but strategize about how much, if any, you will contribute to employees’ accounts. It might be beneficial to contribute a small amount to encourage employees to enroll in the HDHP/HSA benefits combo, but not too much so that it disincentivizes them to contribute themselves. 

Just like with employees’ contributions, HSA contributions from employers are also tax-free.

To find out how much you can save on FICA taxes by offering an HSA, use our [FICA tax savings calculator](https://livelyme.com/payroll-tax-savings/). 

## Improved recruiting and employee retention

The estimated cost of annual turnover at a mid-sized company costs as much as [$7.5 million](https://www.finra.org/media-center/newsreleases/2021/large-number-americans-reported-financial-anxiety-and-stress-even) and depending on the employee, costs as much as 213% of their salary. Average turnover at all companies is currently about 18% per year. Many employers are left scrambling to adjust their retention and recruitment efforts. If you’re one of these employers, here’s what the experts say you can do to keep more top talent in the building:

1. Make sure your benefits are in line with the [labor market as a whole](https://www.shrm.org/hr-today/news/all-things-work/pages/what-employees-want.aspx), not just your industry. Workers, especially those at entry level will happily jump industries if it means earning a higher wage or receiving better benefits. Note: In 2020, 59% of employers offered an HDHP/HSA combo, compared to 50% of employers in 2016.
2. 88% of job seekers will weigh the chance of getting better health insurance benefits for a lower-paying job against lower-quality benefits at a higher paying job. 
3. Not all employees have the same needs so employers should offer a benefits package that allows for flexibility and personalization.
4. HSAs are popular. KFF found that 24% of all covered workers are enrolled in an HDHP/HSA combination.

To keep employees, you have to keep them happy and a good benefits package with popular, usable options that allow flexibility and personalization is one way to do that. HSAs help employers achieve this by:

1. Giving employees the flexibility to pay for the medical care they want with pre-tax money instead of paying a higher monthly premium for care they might not need.
2. Giving employees a tax-free opportunity to save for future medical costs.
3. Giving employees a tax-free way to augment their current retirement savings plan with an additional savings vehicle.
4. Giving employers an opportunity to show employees they’re invested in their employees’ financial and physical health and well-being. 
5. Giving employees a convenient way to use their savings with debit cards that can be used to pay for medical care at the point of purchase.

## More productive employees

Did you know that a [2013 Gallup study](https://www.stress.org/the-stress-productivity-shortfall) found that employees’ lack of engagement at work costs the U.S. economy $450-550 billion a year? And over 275 million working days are lost a year due to stress? 

In a recent survey, [FINRA](https://www.finra.org/media-center/newsreleases/2021/large-number-americans-reported-financial-anxiety-and-stress-even) found that workers, especially younger employees, are feeling more financial stress than ever before. In fact, 60% of respondents reported feeling financial stress because they’re worried about their futures, mounting medical bills, their lack of savings and the state of their physical health and that of their families.

So what does that have to do with you, the employer? Everything. First, researchers have found a causal link between happiness and productivity. Happier employees are [13% more productive](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3470734) on average than unhappy employees. Second, stress accounts for 7.2-11.3% of employee turnover annually. Which means the cost of turnover is $251-$14,492 per employee. 

And the employees who stay? Twenty percent of workers report spending at least five on-the-clock hours per week thinking about their stressors. If the employee works 40 hours a week and has an annual salary of $60,000, that’s $1,500 per employee per year in lost productivity.

So what can you, as an employer do? You can give your employees increased opportunities to save and augment those savings with contributions from the company. An HSA is a great way to do that. 

HSAs help alleviate financial stress because they allow participants to set aside money pre-tax to pay for medical expenses. Participants can invest these savings, allowing them to grow their safety net at the rate of the market and to improve their financial well-being. HSAs also help employees answer the question, “How am I going to pay for that?” when an emergency arises. The fact that HSAs can double as a retirement account is another valuable feature for plan participants and can add to their overall feeling of financial stability. 

Employers that contribute to their employees’ HSAs show their workers that they’re invested in them. That investment goes a long way toward making employees feel valued. Which makes them feel happier at work. Which leads to higher productivity. Stress is an insidious cause of lost productivity in the current work environment, but it doesn’t have to be. [An HSA can help](https://livelyme.com/guides/hsa-guide/).

## How to get started

If you’ve decided that offering employees an HSA is the way to go, you’ll want to talk with your benefits professional about how an HDHP/HSA combination fits into your current compensation package. You’ll want to decide which [HSA administrator](https://livelyme.com/) you want to use, as HSAs are health-plan agnostic, meaning they can be used with any qualifying health plan. Then you need to figure out how much (if any) you’re going to contribute to your employees’ accounts.

One thing to consider is that many HSA administrators require [employers](https://livelyme.com/employers/) to do a lot of the heavy lifting when it comes to operating the plan. Lively doesn’t. Once you’ve set up your plan, you simply invite your employees to participate and we take care of their onboarding and education. You’ll be able to manage the plan seamlessly from our clear and informative dashboard and there will be no hidden fees to contend with. If you run into trouble, we’re here to help. We’re your partner in offering the best benefits package possible for your company.

## Find out more about Lively today

If you’re ready to offer an HSA to your company, you can [get started](https://livelyme.com/employers/) or [reach out to our team](https://livelyme.com/employers/) to walk you through the process. 

Group of happy, multiracial employees sit around a conference table discussing business

HSA add employee value

Employers can find lots of value in health savings accounts. Find out the details here.

What’s the value of an HSA?

The Value of Health Savings Accounts

In a world of text, chat and email it can feel like everything is (or has) an acronym. Health insurance plans are no exception. You may have come across the acronym HDHP and are wondering "What is a High Deductible Health Plan (HDHP)?" Continue reading to learn how choosing an HDHP could benefit you. Provided it gives you the coverage you need.

To start, an HDHP is a health insurance plan defined by lower premiums and a higher deductible. But don't let "higher deductible" scare you off. Here are two reasons why an HDHP could make sense for you:

1. All preventative care is covered before the deductible, and
2. HDHPs are an affordable way to get the coverage you need without paying more for extras you may not need.

HDHPs are also the only health insurance option that can be paired with a Health Savings Account (HSA). An HSA can help pay for the high-deductible or to save money for future medical costs.

<iframe src="https://player.vimeo.com/video/377355900" width="640" height="360" frameborder="0" allow="autoplay; fullscreen" allowfullscreen></iframe>

## What is considered eligible?

Annually, the IRS redefines what it considers an HDHP (adjusting for inflation). In 2022, their parameters were a [health plan](https://livelyme.com/guides/hsa-guide/) with a deductible of at least $1,400 for an individual and $2,800 for a family. As well as out-of-pocket expenses that didn’t exceed $7,050 for an individual and $14,100 for a family.

In 2023, the minimum deductibles and out-of-pocket maximums will rise. For individuals the minimum deductible will be $1,500 for individuals and $3,000 for families. The maximum out-of-pocket limits will rise to $7,500 for an individual and $15,000 for a family.

There's one other qualifying characteristic of HDHPs. The individual pays for the cost of healthcare, up to the deductible, before insurance pays for services. The one caveat here is preventative care. All preventative care is covered before the deductible.

## How do they work?

![preventative-care-included-hdhp](//images.ctfassets.net/6j8y907dne6i/5j1glZm5E5y47Fi5eW2T2K/1ebc0d46beb92be8021d514656948957/preventative-care-included-hdhp.jpg)

HDHPs charge participants lower monthly premiums. This is in exchange for requiring higher deductibles and out-of-pocket maximums.

Choosing an HDHP could make sense if you don't need many health care items or services. Or if you only visit the doctor for preventative care. This is because you'll be spending less on your monthly [health insurance plan](https://livelyme.com/compare-health-insurance-plans/) premium. An HDHP could also make sense if you need more care. Here's why.

Because HDHPs have a higher deductible, the IRS allows you to [deposit pre-tax money into a savings account](https://livelyme.com/blog/what-is-an-hsa/) called an HSA or Health Savings Account. HSAs are tax-advantaged accounts because contributions are pre-tax.

![Infographic High Deductible Health Plan plus HSA how you save](//images.ctfassets.net/6j8y907dne6i/5lcCeg9CA7pfdV9jfLrUVG/86661d1a0187b5c1f8408c52a5247e9f/Infographic_HealthPlan_plus_HSA_HORIZ.png)

The distributions and any gains those contributions make can also be tax-free. That's as long as the contributions are used to pay down your deductible or to pay for other qualified medical expenses. Depending on your tax bracket, this could help you save up to 30% on medical expenses.

Where an HDHP could get you into trouble is if you suffer a catastrophic event that requires an expensive procedure or treatment. And you can’t afford the out-of-pocket maximum. Or if you have or develop a chronic condition that needs management.

__Decide which plan is right for you with our [Health Plan Comparison Calculator](https://livelyme.com/compare-health-insurance-plans/).__

To choose an HDHP, you would make the election during the open enrollment period for either your place of employment or in the private market. The other time is after a [Qualifying Life Event](https://livelyme.com/blog/when-should-i-consider-changing-my-health-plan/). If you’ve experienced a life event like the loss of health insurance, marriage, the birth of a child, or death of a dependent, you can sign up for an HDHP at any time during the year with a special enrollment period.

## What are the benefits?

![high-deductible-health-plans-lower-premium](//images.ctfassets.net/6j8y907dne6i/45YNFcVTSqOIH1GiPuzUVQ/150ddbbe5981bcf60c7150e50f13f6d1/high-deductible-health-plans-lower-premium.jpg)

Whether you’re considering an HDHP or have been using one for years, there’s no question that higher deductibles are a tough pill to swallow. The good news is, this type of health plan does offer some unique flexibility and opportunities that other health insurance plans lack.

1. __Flexibility__ – HMO health insurance plans require referrals from a primary care physician. This can be extremely frustrating for individuals who need to have some kind of care outside of a general practitioner. While HDHPs still have in and out of network designations, the list of in-network providers is extensive. And you can see a dermatologist, cardiologist, or other specialists even if you haven’t yet designated a primary care physician.
2. __Lower cost__ – The problem with large, overarching health plans is they try to cover everyone. This might sound good on paper, but not in practice. This often leads to people with low health care needs paying more to cover people with high health care needs. HDHPs reward limited use of the medical system by charging participants low monthly premiums. While also covering preventative care before the deductible is met.
3. __Health savings for the long term__ – HDHPs are the only health insurance plan that you can pair with an HSA. You own the contributions both you and your employer make to your HSA. And they never expire. The funds can be saved or invested in stocks and mutual funds, making these accounts function as a medical safety net. This is beneficial if you lose your employment or your employer changes your health insurance options. Or if your health insurance company decides to discontinue the plan you’re on, or you experience a catastrophic event. Any of which could leave you scrambling to cover unexpected medical expenses. And in the event you don’t spend your contributions before the age of 65, you can use that money, tax-free, for any expenses. Just like another retirement account. 

## Is this plan right for me?

![is-hdhp-right-for-me](//images.ctfassets.net/6j8y907dne6i/1lGHA7VDq1QmkbEHtrozbq/8ce9096c3149cd21eca124e9fb2a5cf3/is-hdhp-right-for-me.jpg)

*The right health insurance plan for you lies at the nexus of affordability and appropriate coverage.* You must be able to afford the monthly premium but also the annual out-of-pocket maximum in case you experience a catastrophic event.

The plan must also provide adequate coverage for your current medical needs. As well as those in the foreseeable future (e.g. having a baby, knee surgery, etc.). Inadequate coverage could cause your out-of-pocket expenses to get out of hand quickly.

So take a look at the specifics for the HDHP you’re being offered. Can you afford that monthly premium? If yes, then take a look at what procedures, treatments, and prescriptions are covered and at what levels. When taking coverage levels into account, can you afford the copays, co-insurance, and other out-of-pocket costs?

Do you have the ability to contribute even a small amount to an HSA? Something to remember about HSAs is the money is contributed pre-tax. That means you could end up saving up to 30% on medical expenses depending on your income taxes bracket.

If, after answering these questions, an HDHP looks like it makes financial sense, then it could be the right plan for you. If you have questions about your specific situation, you should always reach out to your HR department.

HDHPs are often thought of as an [affordable health insurance option](https://livelyme.com/guides/hdhp/), especially for the healthy or if you know you’ll exceed your out-of-pocket maximum. Combine an HDHP's monthly affordability with the option to pair the plan with an HSA, and you have an attractive setup. Not only for those who have limited medical care needs but those who can afford to contribute a little extra each month toward future costs and savings. 

discover "what is a high deductible health plan?"

what-is-a-high-deductible-health-plan

Discover how an HDHP works, its benefits, and if one is right for you. Pair your Lively HSA with a qualified high deductible health plan to start saving today.

Your Crash Course in High-Deductible Health Plans

Understanding High Deductible Health Plans

You’ve heard about HSAs and FSAs. And you think they are a good way to save money for and on medical expenses. And your employer offers both as part of its benefits plan. 

You’re in luck. You get to choose the option best suited to your needs. And yes, you do have to choose. Because you can’t contribute to an HSA and a Healthcare FSA at the same time. Let’s discover which account type will win in HSA versus FSA.

So how do you choose? To make the best decision for you and your family, consider the details of each account. And compare those to the realities of your family’s medical and financial needs.

## HSA vs. FSA Basics

There are some basic facts you need to know to understand the differences between FSAs and HSAs. 

To start, let's look at what these accounts have in common.

Health Savings Accounts (HSA) and Healthcare Flexible Spending Accounts (FSA) are pre-tax accounts. And are both used to pay for qualified, out-of-pocket medical expenses. These include, but aren’t limited to, copays, deductibles, coinsurance, and prescriptions. Because contributions are pre-tax, you can save up to 30% on those out-of-pocket expenses. Depending on your tax bracket.

How are HSAs and FSAs different? The [major difference](https://livelyme.com/blog/differences-between-hsa-vs-healthcare-fsa-infographic/) they have is that an FSA is an employer owned account that pays for short-term expenses. You must use up the FSA funds you contributed by the end of the year.

HSAs are individually owned, and you can use them for short-term expenses, or long-term savings, like retirement. In addition, account functionality and account holder requirements are different for the two account types. 

Let’s learn a little more about each account type.

## What is a Health Savings Account?

![how-to-choose-between-hsa-fsa](//images.ctfassets.net/6j8y907dne6i/1JfvzE56bAaAExlGqDmfjd/eafd5bc19e833ef342e4349e4eb6f630/how-to-choose-between-hsa-fsa.jpg)

A Health Savings Account is a kind of savings account that allows you to [save for health care costs](https://livelyme.com/blog/what-is-an-hsa/). And reduce your taxable income. In other words, HSAs are individually owned, tax-advantaged medical savings accounts. You can open one as an individual or as part of a family plan. As long as you and your family are enrolled in an HSA-eligible [High Deductible Health Plan](https://livelyme.com/blog/what-is-a-high-deductible-health-plan-hdhp/) (HDHP).

### What’s considered an HSA-eligible health plan?

HDHPs are [health plans](https://livelyme.com/guides/hsa-guide#qualifying-for-an-hsa-account/) with a minimum deductible and maximum out-of-pocket expenses set by the IRS that differs for individuals and families.

The IRS adjusts its allowed annual [HSA contribution limits annually](https://livelyme.com/blog/hsa-contribution-limits/) for inflation, and has different limits for individual and family accounts. If you have a [mid-year change](https://livelyme.com/blog/hsa-contribution-limits-mid-year-changes/) – like moving from self-only coverage to family coverage, or vice versa, then your annual contribution limit becomes prorated.

### How does an HSA work?

When you open your HSA, you choose how much you’d like to contribute annually. Then, your employer will deduct the appropriate amount from each paycheck. Your employer may choose to also contribute to your account. But they’re not required to.

If they do contribute, those contributions will count toward your [maximum annual limit](https://livelyme.com/guides/hsa-guide#maximizing-your-savings). Choose your individual contribution amount carefully. And keep in mind that contributions are cumulative. Otherwise, you could end up going over the annual contribution limit.

If you’re under the age of 65, you must use your contributions to pay for qualified medical expenses. These include, but are not limited to:

- Copays
- Coinsurance
- Deductibles
- Acupuncture
- Mental health treatment
- Prescriptions
- Medical supplies like [bandages](https://hsastore.com/SearchProducts.aspx?q=band+aid&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [crutches](https://hsastore.com/SearchProducts.aspx?q=crutches&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [joint braces](https://hsastore.com/SearchProducts.aspx?q=braces&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), and more
- Hearing aids
- Dental health
- Vision tests

Want to see the full list of HSA-eligible expenses? Visit [What’s Eligible?](https://livelyme.com/whats-eligible/)

### How age affects HSA use and taxes

![age-affects-hsa-taxes](//images.ctfassets.net/6j8y907dne6i/1mxiaR9se6IhBYokKGgsdd/86de5569ecab00a84ae82f763e30789e/age-affects-hsa-taxes.jpg)

If you’re under the age of 65 and use your contributions for qualified medical expenses, those funds are not subject to federal income tax. But, your state tax liability for contributions depends on your state.

If you choose to use the money for something other than qualified medical expenses, you will incur a 20% tax penalty. And have to pay income taxes on the misused money. After age 65, you can use your health savings on anything you want provided income tax is paid on the amount of the non-qualified disbursement.

## What is a Flexible Spending Account (FSA)?

There is only one type of HSA, and its main use is to pay for qualified medical costs at any age. 

There are three types of FSAs: 

- [Healthcare FSA](https://livelyme.com/blog/what-is-a-healthcare-fsa/)
- [Dependent Care FSA](https://livelyme.com/blog/what-is-a-dependent-care-fsa/)
- [Limited Purpose FSA](https://livelyme.com/blog/what-is-a-limited-purpose-fsa/)

When people use the term “FSA,” they are most often talking about a [Healthcare FSA](https://livelyme.com/blog/what-is-a-healthcare-fsa/), which is a spending account your employer makes available to pay for qualified medical expenses with pre-tax dollars. HDependent Care FSAs are for qualified care expenses, like child or adult daycare. Limited Purpose FSAs are only used for qualified dental and vision expenses. 

The most important thing to remember is that you cannot contribute to a Healthcare FSA or Dependent Care FSA and an HSA at the same time. But you can have a Limited Purpose FSA and an HSA at the same time. 

### How does a Healthcare FSA work?

If you decide you would like to open an FSA, the good news is that you don’t have to purchase a specific health plan. In fact, you don’t have to purchase any health plan.

But you must elect to participate during your employer’s open enrollment period. Or within 30 days of starting employment if you begin your job mid-year. Then, you select the amount you would like to contribute to your account at that time. Your employer will then deduct the appropriate amount from each paycheck.

Your employer can choose to contribute to your FSA but is not required to do so. And their contributions don’t count toward your annual max. Unfortunately, you can’t change this election at any point outside of open enrollment. Unless you’ve experienced a [qualifying life event](https://www.healthcare.gov/glossary/qualifying-life-event/) like the birth of a child, death of a dependent, marriage, or divorce. 

![qualifying-life-event-fsa-contribution-amount](//images.ctfassets.net/6j8y907dne6i/td25GiIFP70vewqfrlrSD/751854829eee489fc8a0c81fddb11efb/qualifying-life-event-fsa-contribution-amount.jpg)

You also lose any unused money at the end of the year. Unless your employer offers either the option to [rollover a small amount of funds](https://livelyme.com/blog/fsa-contribution-limits/) to next year’s account or a 2.5 month grace period during which you can use leftover funds. So choose your contribution amount carefully.

Like with HSAs, the IRS imposes [an annual limit on FSA contributions](https://livelyme.com/blog/fsa-contribution-limits/) that adjusts annually for inflation. Unlike HSAs, FSAs are only opened on an individual basis, so there are no “family plan” increases for annual contribution limits. But if both you and your spouse are offered the opportunity to take part in an FSA at work, you can do so and each can contribute up to the maximum allowed amount.

FSA funds can be used to pay for out-of-pocket medical, vision, and dental expenses not covered by your health insurance plan. Including, but not limited to:

- Copays
- Coinsurance
- Deductibles
- Acupuncture
- Mental health treatment
- Prescriptions
- Medical supplies like [bandages](https://fsastore.com/SearchProducts.aspx?q=bandages&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [crutches](https://fsastore.com/SearchProducts.aspx?q=crutches&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [joint braces](https://fsastore.com/SearchProducts.aspx?q=joint%20braces&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), and more
- Hearing aids
- Dental health
- Vision tests

For a full list of medical expenses that you can use your FSA (or HSA funds) on, check out [Publication 502](https://www.irs.gov/forms-pubs/about-publication-502) from the IRS. You can also visit the [FSA Store](https://fsastore.com/?utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner).

## The differences between HSAs and FSAs

![choose-between-hsa-fsa](//images.ctfassets.net/6j8y907dne6i/EqKcpDQS9JGMip8psYcVj/994cea7acae40c6fc14eecff7688fdfc/choose-between-hsa-fsa.jpg)

### Eligibilty requirements

- __FSA:__ Only employers can establish an FSA plan for employees to contribute. Employees can open an FSA regardless of if they have a HDHP or not. Self-employed individuals cannot open an account.
- __HSA:__ Employees are eligible only if they have an [HSA-eligible HDHP](https://livelyme.com/guides/hsa-guide#qualifying-for-an-hsa-account). Individuals are not dependent upon their employer to offer an HSA. And an HSA can be opened from the private market. Self-employed individuals can open an account.

### Contribution sources and changes

- __FSA:__ The contribution amount is chosen during open enrollment or at the time of a qualifying life event. And the contribution amount can not be changed outside of these two time periods.
- __HSA:__ You can change your contribution amount at any time, no major life event required. This gives you the flexibility to increase or decrease your contribution at any time. *__Multiple contribution sources:__* You can grow your HSA in multiple ways. Not only can you add money to your HSA, but your employer, relatives, or anyone who would like to contribute can help your HSA grow.

### Rollover rules

- __FSA:__ Employers choose whether an employee can keep their unused funds or not. There are [three options](https://livelyme.com/blog/fsa-rollover-versus-grace-period/): *__Forfeit__*: Employee forfeits money, and employers get to keep it. *__Grace period__*: Employee has a 2.5 month grace period after the plan year ends to use on expenses. Any remaining money after the grace period is employer’s. *__Carryover__*: Employees can add a small amount of unsued funds, [set each year by the IRS](https://livelyme.com/blog/fsa-contribution-limits/) (in addition to contribution limit). Employers decide the carryover limit, and any funds over the limit are the employer’s.
- __HSA:__ Funds do not expire from year-to-year. Rollover money is in addition to the contribution limits. Money in your HSA can be carried with you and is available even if you change health insurance plans, get a new job, or retire. And funds left in your account grow tax-free through interest or any investment gains.

### Account ownership

- __FSA__: An FSA is owned by the employer. Unused funds belong to employers, not the employee.
- __HSA__: Funds stay with you. One of the best perks of an HSA is that the money you save always stays with you because you own the account. If money is left in your HSA at the end of the year, it stays put. No scrambling around trying to find ways to spend the money before the timer runs out.

### Access to money

![accessing-hsa-fsa-contributions](//images.ctfassets.net/6j8y907dne6i/4lJ6EN6128M5SHmAuh8hzk/60301225072d2cec1be8a6e2fda926ca/accessing-hsa-fsa-contributions.jpg)

- __FSA:__ Money available from day one. Every penny you contribute to your FSA is available at the beginning of the benefit year. Or shortly after the first contribution is made. Say you add $2,000 to your FSA for the year, you’ll likely contribute about $80 per paycheck. Yet, the entire $2,000 is available to use at any time even though you only make small contributions during the year. Another perk? If you leave a position before the year is over, the money spent from your FSA doesn’t have to be paid back.
- __HSA:__ As the employee contributes to their plan. An employee only has access to what has actually been deposited into their HSA account.

### HSA: A savings asset

- *__After the age of 65, your HSA functions like any other retirement account.__* And you can use your HSA money on anything you wish. How does it differ from other retirement accounts? You don’t pay income taxes on money used for medical expenses. You do, however pay income taxes on money used for anything else.
- *__HSAs are assets you can pass on to your kin:__* If your spouse inherits the HSA, it retains its status as a retirement-like account. With the same rules and allowances as it had when you were the account holder. If you pass it on to someone other than your spouse, it stops being an HSA, and inheritance laws apply.

## Understand the pros and cons to find what’s best for you

![is-hsa-fsa-better](//images.ctfassets.net/6j8y907dne6i/7dkm3u9Ez0B7z6r7ZndKdK/d746299a286d54387aae669880b9cbb2/is-hsa-fsa-better.jpg)

While it’s likely you’ll only be eligible for either a Healthcare FSA or an HSA, it is still a good idea to take a look at the pros and cons of both types of accounts. This can help you understand how they align with your greater financial goals and help you decide what healthplan to choose.

### HSA Advantages

- __Portable account__: means you own the account and don’t lose it if you change jobs
- __Triple-tax advantage__: Contribute funds pre-tax, funds grow pre-tax, withdraw funds pre-tax for qualified expenses
- __No use-it-or-lose-it rules__: Spend now or save for retirement.
- __Anybody can contribute to your HSA__: This includes your employer, spouse, family, or friends, as long as you don’t go over the annual contribution limit.

### HSA Disadvantages

- Must enroll in a HDHP and meet other qualifications to have one
- May be subject to fees from the provider
- If you use your HSA for non-qualified expenses over age 65 you'll owe an additional 20% tax penalty on top of any taxes due

### Healthcare FSA Advantages

- __Double tax savings__: Contribute funds pre-tax, withdraw funds pre-tax for qualified expenses
- __Health plan agnostic__: Can enroll in one if your employer offers it, do not need to have a specific type of health insurance plan

### Healthcare FSA Disadvantages

- Only available from an employer, can’t have one if you are self-employed
- Employer owned, means you lose the account if you change jobs
- Subject to use-it-or-lose-it rules, meaning you lose funds if you they are not used during the plan year

## Align Your Goals with Your Savings

Deciding between an HSA and FSA depends on your medical and financial needs. The principal requirement for an HSA is enrollment in an HDHP. And while preventative care is covered before the deductible under HDHPs, most other care is not. That means you will have to pay for your medical expenses for you and your family out-of-pocket until you reach your deductible.

An HSA-eligible HDHP makes the most sense in two cases. First, [if you or one of your family members](https://livelyme.com/features/) has a condition that needs managing by either a specialist or with speciality prescriptions or treatments. In this case, you’ll likely exceed the deductible and be able to use HSA funds to save up 30% on out-of-pocket medical costs.

Secondly, if you rarely use the medical system except for routine preventative care (that includes vaccines and well visits for children) and really want the ability to use your pre-tax account as an investment vehicle to save for retirement. Then, an HSA/HDHP arrangement may be the best choice for you.

To make the best decision for you and your family, start by assessing your past medical needs and those you can project. Then take a look at your finances. Choose the account and health insurance plan arrangement that sits at the nexus of best health coverage and account flexibility.

comparing hsa versus fsa

An HSA and FSA provide up to 30% savings on out-of-pocket healthcare expenses, but you can’t contribute to both. Let’s explore the pros and cons of each account.

HSA vs. FSA: How Do They Compare?

What is the Difference Between a Flexible Spending Account and a Health Savings Account?

Finding the right health insurance plan for you can feel daunting. One of the questions you may be considering is whether you should get an HSA or PPO. The good news is that you might not have to choose at all. Here’s what you need to know about both and how you can utilize them to maximize your health savings.

## HSA vs PPO: Why not both?

Before we get into the details of each option, let’s clear something up. A Health Savings Account (HSA) is a [tax-advantaged account](https://livelyme.com/guides/hsa-guide/) that allows you to save for qualified medical expenses — it’s not a health insurance plan. 

On the other hand, a preferred provider organization (PPO) is a type of health insurance plan that provides access to health care in a certain way. 

In fact, you [can have a PPO plan and an HSA](https://livelyme.com/blog/can-an-hdhp-be-a-ppo/) at the same time. Here’s how they both work.

### Preferred Provider Organizations

A PPO refers to the network coverage your health plan gives you access to. If you get your healthcare with providers who are in the network of your healthcare plan, you pay less for healthcare than with providers outside the network. However, you may still get some coverage with out-of-network providers. 

One major benefit of a PPO is that you don’t have to get a referral from your primary care physician to visit with a specialist. Simply check if they’re in your plan’s network and book an appointment with them directly. 

The biggest competitor to PPOs are [HMOs (health maintenance organizations)](https://livelyme.com/blog/hmo-vs-hdhp/), which allow you to coordinate your healthcare with your primary care physician, but at the cost of having access to a smaller network of providers.

### Health Savings Accounts

An HSA is a type of health savings plan that allows you to set aside money to pay for medical costs, up to a [maximum each year](https://livelyme.com/blog/hsa-contribution-limits/) which is set by the IRS.

Contributions to an HSA are tax-deductible, and your earnings in the account grow tax-free. As long as you use the funds for eligible medical expenses, those distributions are tax-free, too — that’s what the experts call a triple tax advantage.

To be eligible to contribute to an HSA, you have to have a [high-deductible health plan (HDHP)](https://livelyme.com/guides/hdhp/), which has a deductible and out-of-pocket maximum that are higher than traditional health plans. In exchange, they charge lower monthly premiums. 

### Can you get an HSA on a PPO plan?

In a lot of the information you may find online, it can sound like HDHPs, PPOs and HMOs are all separate types of health plans. But [HDHPs are defined only by their deductibles and out-of-pocket maximums](https://livelyme.com/guides/hdhp/) and have nothing to do with your network of providers.

In fact, the beauty of all of it is that it’s possible for an HDHP to be on a PPO network. That’s not to say the two are synonymous, though. Many PPO plans have low deductibles and out-of-pocket maximums, which are usually paired with higher premiums. 

Because this can get confusing, we’ll use the term “typical plan” or “traditional plan” to refer to the low- deductible, high-premium plans you can get on a PPO or HMO network, and we’ll use HDHPs for HSA-eligible plans that you can also get on both networks.

Now, with that out of the way, let’s get to the heart of the matter. The question isn’t whether an HSA is better than a PPO. The question is really whether you want an HDHP that qualifies for an HSA or a low-deductible plan?

## What is an HDHP?

As previously discussed, a high-deductible health plan is one where you have higher deductibles and out-of-pocket maximums than traditional plans, but also lower premiums. 

The limits are [determined each year by the IRS](https://livelyme.com/guides/hdhp/). These figures are sometimes much higher than what you’ll find with a traditional health plan. But the option to contribute to an HSA helps soften the blow a bit, especially if you have a high income and can benefit greatly from the tax breaks HSAs provide.

An HDHP can also be a good choice if you don’t have a history of needing medical care often. While there is a risk of ending up with a higher payment in some circumstances, you’ll have the certainty of lower monthly payments.

## What do traditional PPO and HMO plans offer?

These traditional plans charge higher premiums than HSA-eligible plans, but they also have lower deductibles and out-of-pocket maximums. In fact, some PPO and HMO plans have no deductible at all. They’re great if regular office visits are part of your health regimen.

The difference between a PPO and an HMO is how the provider network works. With an HMO, you’ll deal with your primary doctor most of the time and need to get a referral if you want to see a specialist. A PPO, on the other hand, gives you options to see other doctors and specialists without needing to go through your primary care physician.

## Why should you get an HDHP?

The biggest benefit of an HDHP is that it gives you the option to contribute to an HSA. To give you an idea of the potential savings, let’s say you have a family plan and can contribute $7,200 this year. 

If your effective tax rate for the year is 15%, that contribution cut $1,080 off your tax bill for the year — of course, as long as you don’t use your HSA funds for ineligible expenses.

In addition to saving for upcoming health care costs, you can also use an HSA to save for retirement. Health care is one of the [most expensive aspects of retirement](https://livelyme.com/blog/retiring-how-much-you-will-actually-need-healthcare/), and is estimated to cost an average couple $300,000 to $400,000 to pay for it.

Even if you don’t want to use your HSA for medical expenses in retirement, you can take withdrawals without the typical 20% tax penalty once you reach age 65. That said, the distributions will be subject to income taxes.

HDHPs can also be good if you’re young or generally healthy and don’t expect to spend a lot on medical care throughout the year. Of course, there’s no guarantee you won’t need an expensive procedure or visit to the emergency room. 

Even with most doctor visits, you have to pay the full bill before your insurance coverage kicks in. As a result, HDHP plans are best if your risk tolerance is high. 

## Why should you get a traditional PPO or HMO plan?

A traditional health plan won’t give you access to an HSA. But it can be great if you expect to make regular doctor visits or to get medication frequently throughout the year.

Their lower deductibles mean you’ll hit your limit sooner, and your insurance coverage will kick in earlier. For instance, they’re great if you’re pregnant as you’ll be doing regular check-ups with your doctor while you’re expecting.

Also, it’s possible to get access to a Flexible Spending Account (FSA) with a traditional health plan. FSAs are [another type of health savings plan](https://livelyme.com/blog/hsas-vs-fsas/), but you can only contribute to one if your employer offers it as a benefit. 

FSAs have some of the same benefits as HSAs, including pre-tax contributions (not the same as deductible contributions, but it’s the same concept). Also, when you designate how much you want to contribute over the next plan year, you’ll receive that amount at the beginning of the year instead of waiting to build up the balance through your payroll deductions. 

The biggest drawback of an FSA is its use-it-or-lose-it provision. This means that if you don’t use all of the money you contributed during the plan year, you could lose the remaining balance. 

Employers are allowed to make some exceptions, such as giving you more time to incur qualified expenses or allowing you to carry over some of the balance into the new year. But that’s not guaranteed.

Also, your FSA stays with your employer, so if you get laid off or move to another employer, you lose the money you’ve saved.

## Pros and cons of HDHP plans

Before you pull the trigger on a new health insurance plan, it’s important to understand both the benefits and drawbacks. Here’s a summary of what you need to know about HDHPs. 

### Pros of HDHP plans
- You’ll pay lower premiums than with traditional plans.
- You can contribute to an HSA and enjoy the tax benefits.
- HSAs don’t have a use-it-or-lose-it provision like FSAs.
- HDHPs can also be PPOs and HMOs, giving you more flexibility with your options.

### Cons of HDHP plans
- Deductibles can be high, which can be a colossal financial setback if you’re unprepared.
- Even simple doctor visits can be a major expense, especially if they include tests and screenings.
- You may find it difficult to contribute to an HSA if your out-of-pocket expenses are high every month.

## Frequently asked questions

### Can I have an HSA and a PPO?

Yes! In fact, many HSA-eligible health care plans are part of PPO networks. However, not all PPO plans are HSA eligible. Check if your plan allows you to have an HSA when shopping around.

### Is it better to have an HSA or a PPO?

If you’ve come across this question online, it’s important to note that it’s misleading. HSAs are a form of savings account that you can get with some healthcare plans. PPOs refer to the network your health insurance gives you access to.

But people tend to associate HSAs with HDHPs. And they associate PPOs with low deductible plans. The truth is that you can get a PPO plan that’s also an HDHP and, therefore, eligible for an HSA.

Hence the correct question is: Is it better to have a high-deductible or low-deductible health plan? The answer: it depends. It depends on your risk tolerance, how often you expect to visit the doctor, and how much you can afford to save up.

For instance, if you’re young and healthy and don’t expect a lot of doctor visits, an HDHP is an excellent way to save on monthly premiums. It’s also important to consider how much you can actually contribute to an HSA, which determines your tax benefits.

On the flip side, if you’re older, pregnant or have pre-existing medical conditions that require you to need regular check-ups, a traditional health plan may be a better fit, even with higher premiums. 

Finally, just because you’re young and healthy, it doesn’t mean you won’t max out your deductible or out-of-pocket maximum. You’re essentially betting that you won’t have to spend more on out-of-pocket costs than what you’re saving by not choosing a traditional plan. As such, HDHPs are better for folks with high risk tolerance. 

### What’s the difference between HRA and HSA health insurance?

An [HRA (Health Reimbursement Arrangement)](https://livelyme.com/blog/what-is-an-hra/) has a similar premise to an HSA. It’s a savings account that you can use to reimburse medical expenses. The big difference is that HRAs are only available through an employer, and only your employer can make contributions. 

In contrast, an HSA belongs to you, and you, your employer or anyone else can make a contribution. Also, HSAs are portable, so you don’t have to worry about losing anything if you leave your company.

With an HRA, if you leave your employer, you lose access to that money because it never really belonged to you.

### What’s better, an HSA or an HRA?

Like most things in life, it depends. It depends on you and your needs. HRAs and HSAs also have different benefits for employers and employees.

If you’re an employer, [advantages of an HRA](https://livelyme.com/blog/what-is-an-integrated-standard-hra/) include:
- Tax advantages.
- You can integrate them with FSAs.
- Better employee retention.

However, if you want to offer an HSA to your employees instead, your benefits include: 
- Tax advantages.
- Flexibility with how much you contribute.
- Less record keeping.
- Your workforce becomes more engaged with their health care and medical expenses.
- Lower expenses.

On the other side of the coin, if you’re an employee, the [benefits of an HRA](https://livelyme.com/guides/hra-guide/) include:
- No need for an HDHP.
- It’s completely funded by your employer. 
- You have access to the funds from the first day of coverage.

However, if you choose an HSA instead, here are the advantages:
- Portability.
- Can invest the funds for retirement in mutual funds.
- You get all the tax benefits.
- 
### Are all high-deductible plans HSA eligible?

Not necessarily. They need to meet the requirements set by the IRS to qualify as a true HDHP, which is HSA-eligible. Also, true HDHPs will cover preventive care without requiring you to hit your deductible but offers no other benefits until you reach that point.

Also, it’s important to note that in order for you to be able to contribute to an HSA, you must also meet other requirements, including;
- You have coverage under the IRS’s definition of an HDHP on the first day of the last month of the year.
- You have no other health coverage, and you’re not enrolled in Medicare.
- Someone else isn’t claiming you as a dependent on their tax return.

### Can I have an HSA if my employer offers an HRA?

Yes, but only under very limited circumstances. Most general HRAs will make you ineligible for an HSA. But if your company offers a “limited purpose” HRA or a “post-deductible” HRA, then you may still be eligible for an HSA. Also, if your employer contributes to an HRA that you can only use when you retire, you may be eligible for an HSA.

A “limited purpose” HRA is one where you can only use it for dental, vision or preventative care. A “post-deductible” HRA is one where you can use it to pay for medical expenses after the IRS deductible is met.

### Can I contribute to an HSA without an HDHP?

No. But you can still spend the funds in your HSA or reimburse your medical expenses until the account is empty. 

### Can I have an HSA if my spouse has an HSA?

If your spouse has an individual health policy and no other form of health insurance, then you can get an HSA for yourself, as long as you meet all the other requirements. 

However, if your spouse uses a [health care FSA](https://livelyme.com/blog/what-is-a-healthcare-fsa/), then you wouldn’t be eligible. This is because your partner can also use their FSA funds to pay for your medical expenses. The devil’s in the details, though. If your spouse’s FSA is a limited purpose FSA (one that covers vision and dental only), then you can get an HSA.

### Can an HSA plan have copays?

Yes. The IRS defines copays as an out-of-pocket expense in an HSA-eligible HDHP. HDHPs have to have a [max out-of-pocket limit](https://www.healthcare.gov/glossary/high-deductible-health-plan/).

### Can HRA be used for premiums?

For most employers, the simple answer is no. HRAs were often used by employers to reimburse workers insurance premiums. But, that changed with the Affordable Care Act (ACA). Under the ACA, an HRA can no longer pay for health premiums. There are some exceptions, though.

For example, ACA market reforms do not apply to retirement HRAs and stand-alone. The first option is offered only to retirees, while the second is an HRA with only one plan member. Under these two specific HRAs, you can use them to reimburse health care premiums.

### Can HRA funds be rolled over to an HSA?

As of 2012, you can’t roll funds over from an HRA into an HSA.

### Can you contribute to an HSA without health insurance?

No. To contribute to an HSA, you must be on a qualified HDHP and not otherwise insured. A family member can contribute on behalf of other family members as long as they are eligible. But to be able to contribute to an HSA, you need to have an HDHP.

## How to work out what plan is best for you

When deciding which health plan to choose, you’ll want to take a thorough look at the following factors:
- Do you expect to visit the doctor often? 
- What is your risk tolerance? 
- Will you be able to afford an expensive medical bill if an unexpected event happens?
- How big of a network do you need?
- Can you max out an HSA every year?

Take a clear look at the math of the plans you’re weighing up. Sometimes even though the deductible for a traditional plan is lower, it doesn’t make financial sense if the employer contribution to the HSA in the HDHP plan is high. 

At the end of the day, no-one can tell you what plan is best for you. Only you know your unique situation and your risk tolerance. Consider speaking with a tax advisor to get personalized advice to help you make the choice that’s best for you.

Choosing the right health care plan for you hsa vs ppo

HSA or PPO? The good news is that you don’t have to pick, as long as you have a high-deductible plan in a PPO network.

HDHP HSA vs PPO Plans: Which is better for health insurance? 

What’s the Difference Between an HDHP with an HSA and a PPO?

What if I qualify for Medicare?

If you qualify for Medicare and have HSA questions our articles can help.

What if I am married or planning on getting married?

Here you will find HSA related articles regarding marriage and tax savings.

What if I am unemployed?

Currently unemployed? Find out how you can save on your taxes with these USA articles.

What if I am self-employed?

If you are self-employed in a high deductible health care plan (HDHP) read our articles on how HSA's can help save money on taxes.

What if I have or was offered job-based insurance?

Offered job-based insurance? Read our articles.

What if I just had a baby or adopted?

Whether you had a baby or adopted one our articles on HSA tax savings can help.

What if I had a baby or just adopted?

What if I am under 30?

If you are under 30 and have a high deductible health care plan find out how an HSA can save you money.

What if I have children?

Are you looking for HSA related articles regarding children? Take a look at what we have.

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