ideas and advice to benefit your financial life.
Employees who Pass on Health Flex Accounts Fail
According to the Washington Post, only 20% - 30% of all eligible employees reap tax savings on their family's healthcare and daycare expenses through their company benefit plans. The most commonly cited reason is fear of the "use-it-or-lose-it" rule, which basically prohibits the return of unused funds to the employee at the end of the year. Even though using these funds is now easier than ever with the addition of both over-the-counter medications and a grace period, many employees still can't stand the thought of losing any of their hard-earned money, and rightly so. But, do they really lose it even if they don't use it all? Absolutely not, and here's why...
Suppose I budget $7,500 for my family's eligible childcare and healthcare expenses. Based on our income, we'll save over 30% in federal income and payroll taxes on this amount - $7,500 X .30 = $2,250. If, at the end of the year, we lose $250 in unused funds, have we lost? Of course not - we still saved $2,000 ($2,250 - $250 = $2,000). That's $2,000 we would have truly lost by not participating at all! Better to be penny wise than pound foolish!
HSA Fees get a Checkup
JoAnn Laing, President of Information Strategies, Inc., released rankings of the best and worst HSA account fees. Fees vary on a multitude of factors, such as account establishment, minimum deposit, minimum balance, annual trustee and custodian fees, cost of fund access options, and recurring service charges. In addition accounts also vary significantly in terms of the rate of credited interest and performance rates of available investment options. When it comes to selecting the HSA trustee, it really does pay to compare.
HSA, HRA, FSA - What to serve with your HDHP?
Increasingly, we are seeing the proliferation of High Deductible Health Plans (HDHP) as an effective tool to control rising health insurance premiums. Although these policies are a prerequisite for HSA eligibility, employers have several other welfare benefit options from which to choose for qualified funding of medical expenses subject and subsequent to satisfying the HDHP deductible. Employers need to carefully consider all of their options to determine which combination is best suited to achieve their goals and objectives.