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When can I make an election change to my FSA? To my HSA?

There are many common misconceptions regarding election changes when it comes to pre-tax benefit accounts. In fact, 1 in 3 people understands when an election change can occur for a health savings account. (HINT: It is more often than you might realize.) This is understandable given that flexible spending accounts have been available longer and are likely shaping people’s opinions regarding HSAs. With open enrollment in full swing for many people, it is an important time to break these misconceptions down. Let’s start by looking at the basics of an election change.

The Basic Rules of FSA and HSA Election Changes

Flexible Spending Accounts: An FSA election change can occur at open enrollment each year or when a qualifying event has occurred (if permitted by the employer). The IRS specifies that election changes during the plan year must be consistent with the eligible change in status. All changes must follow IRS guidelines and generally require supporting documentation of the event. The most common qualifying events include:

  • Change in marital status (such as marriage, divorce or death of a spouse)
  • Birth / adoption of a child
  • Change in employment affecting eligibility or coverage
  • Change in residence or change in cost of coverage (restricted to Dependent Care FSA changes)

Health Savings Accounts: An HSA election change can occur at any time, for any reason. An employer may limit changes to once per month for administrative purposes. However, there are no other restrictions on changing your pre-tax HSA elections.

Applying the Basic Rules for an Election Change

With a clear understanding of the basic rules, let’s run through a few scenarios. We’ll start with a few easy ones and move on to some more complicated scenarios.

Scenario #1: It’s open enrollment

Impact to FSA election: Follow your employer’s process to enroll in the FSA. Be sure to enroll prior to the end of the open enrollment period. You will need to actively make an FSA election each plan year. This is your main opportunity to start or stop an election, and increase or decrease an election.

Impact to HSA election: Follow your employer’s process to enroll in the HSA. If you already have an HSA with your employer’s preferred HSA partner, you will not need to enroll each year. Be sure you understand the process your employer is using to fund and set HSA pre-tax contribution amounts. If your employer is using direct deposit to fund the HSA, you may have a rolling election, which is only changed when it is requested. Your employer may however use open enrollment as an opportunity for all HSA eligible employees to update and change their elections. In this case, you may need to actively select an HSA pre-tax contribution amount in order to continue contributing in the new plan year. HSA limits are set by the IRS each year.

Scenario #2: I just got married.

Impact to FSA election: Notify your employer of your change in marital status as soon as possible. There is a limited time period from the event in which you are eligible for a mid-year election change. When getting married, you are eligible to INCREASE your FSA election.

Impact to HSA election: Make changes at any time!

Scenario #3: I had a baby.

Impact to FSA election: Notify your employer of the birth of your child. The birth of a child (or the date of adoption) allows you to INCREASE or START a Medical FSA election and/or a Dependent Care FSA election. Confirm with your employer on any limitations that may apply.

Impact to HSA election: Make changes at any time!

Scenario #4: My spouse changed jobs and I am starting benefits with my employer.

Impact to FSA election: Notify your employer of your qualifying event and follow the steps to enroll in the FSA.

Impact to HSA election: Make changes at any time!

Scenario #5: I moved and will no longer need child care services for my eligible dependent.

Impact to FSA election: Notify your employer of the change of address and change in child care expense. Follow the steps outlined by your employer to stop your active Dependent Care FSA election. However, moving is not generally a qualify event for purposes of a Medical FSA. Therefore, changes would not be permitted to your Medical FSA.

Impact to HSA election: There is no direct impact to an HSA. However, there is also no restriction against changes. If you no longer have a child care expense, that is a great time to consider increasing your HSA election.

Scenario #6: My employer is changing health plans mid-year, but the FSA is on a calendar year.

Impact to FSA election: A change in health plan is not a qualifying event. If you are already enrolled in a Medical FSA, you would continue with your existing election through the end of the FSA plan year.

Impact to HSA election: If you select an HSA-qualifying health plan and are still covered by a Medical FSA, you are not eligible to contribute to an HSA until after the FSA plan year ends. If you are changing health plans and will no longer by covered by an HSA-qualified health plan, you will need to determine your prorated HSA contribution amount for the year and may need to stop contributions.

When in doubt…tips to consider

As you can see, these are just a few scenarios affecting an election change. It can be complicated. Remember these few tips the next time you consider changing your FSA or HSA election.

  • TIP #1: PLAN FOR THE EXPECTED WHEN IT COMES TO FSA ELECTIONS.  Consider what lies ahead in the coming year. When possible, factor situations that are known into your initial FSA election.
  • TIP #2: FSA ELECTION CHANGES NEED TO BE CONSISTENT WITH THE STATUS CHANGE—This is the tricky part. When you have a qualifying event, the election change must also be consistent with the impact of the qualifying event. So, if your family gets bigger, you can increase elections. If your family gets smaller, you may be eligible to decrease an election. Note: Employers may restrict mid-year election changes.
  • TIP #3: AS LONG AS YOU ARE HSA ELIGIBLE, HSA CHANGES CAN BE MADE. Determining when you are eligible to contribute to an HSA can sometimes be complicated. Everything else is pretty simple. HSA election changes can be made at any time, for any reason.
  • TIP #4: When in doubt, seek advice.

How Does Health Insurance Work for Small Business Companies

For many folks, health care can be a mixed bag. Long appointments, cold waiting rooms, and unexpected bills. But once you dig a little deeper, you’ll find a lot of great things swirling inside. In this article, we’ll walk you through everything from Obamacare requirements to data on which benefits employees want most.

Do I need to offer health insurance?

This is where it all begins. To get your answer, you first need to see if the Affordable Care Act, or ACA, requires you to offer your employees Health Insurance. The ACA is a piece of legislation that helps people get their hands on more affordable medical coverage. It explains how carriers, employers, individuals, and other entities can help make health insurance happen.

Specifically, the employer mandate is where companies can find out what they have to do. The mandate tells employers they need to offer comprehensive and affordable health insurance if they have 50 or more people on staff. If companies don’t follow the rules, they’ll have to pay the IRS a penalty called the shared responsibility payment. Complying is way better than getting socked with fines.

Does the employer mandate apply to you?

To find out if the rule applies to you, you first have to figure out how many full-time equivalent (FTE) employees you have on your team. Use the formula below to crack the code.

(Total hours worked by part-time employees each week / 30) + # of full-time employees = Your FTE number)

If you need a little more help, you can also jump through the steps below:

  1. How many hours do each of your part-time employees work each week? Add them all up.
  2. Divide the result you get by 30.
  3. Round down to the nearest whole number.
  4. How many full-time employees do you have?
  5. Add this number to what you got above.
  6. Bravo — you’ve just successfully figured out your FTE number!

The number you just got is your formula for figuring out your ACA requirements. Now, use it to find where you fit on this chart:

I have 49 or fewer FTE employees:

Nope, you don’t have to provide health coverage. That being said, many companies proudly offer insurance to their teams even though the ACA doesn’t explicitly require them to.

I have 50 or more FTE employees:

Yep, you do have to offer health coverage! Ninety-five percent of your full-time employees have to be covered.

Think back to how big your team was in the previous year. That number will help you find out if you’re required to offer insurance today.

Should I offer health insurance?

Keeping your team healthy is one of the most important ways to show them that you appreciate everything they do. Even if companies aren’t required to provide coverage under the Affordable Care Act, many do so regardless. A little over one in four companies with fewer than 50 employees provide health insurance and a promising 22 percent plan on rolling it out next year.

Here are a few reasons why offering benefits is such a great decision:

It’s what your team wants

Glassdoor recently surveyed employees on how 54 benefits influenced their satisfaction. They found that health insurance was, by far, the most important of all the benefits that exist. The top three benefits that make employees feel satisfied? Health insurance, paid time off, and retirement plans.

It helps keep you compliant

If you have 50 or more full-time equivalent employees, then the ACA requires you to offer health coverage. It’s a clear-cut rule that makes everything clearer. All you have to do is figure out how many FTE employees you have.

It makes your culture shine

When someone starts a new job, fussing with all the intricacies of health insurance can feel overwhelming. If an employer handles that part, new employees can focus their time on getting used to their new role instead.

Saves you money on taxes

Do you have 24 people or less on your team? Then you may be eligible for hidden money through the small business health care tax credit. The credit equals up to half of your premium contributions if you’re a small employer, and for tax-exempt companies, it covers up to 35 percent.

If you can safely check off each box below, then the tax credit could be in your future.

  • You buy your plan through the Small Business Health Options Program, called SHOP
  • Your team has an average salary of $50,000 or less
  • You pay at least half of everyone’s premiums

Be sure to check with your accountant or broker to get a final call on your eligibility status. They’ll also be able to help you take advantage of any retroactive tax credits you’re be entitled to.

How do I get health insurance?

Once you know you’re ready to offer insurance, you sign up for a small business plan in a few different places:

  1. The SHOP federal or state marketplace (if you live in a state that offers it)
  2. Call GoGetCovered!
  3. Directly through your insurance carrier

Your setup checklist

To streamline your setup process (or just get a quote), you’ll want to have a few bits of information handy:

  • Company tax information (federal EIN)
  • Current and appropriate levels of workers’ compensation coverage
  • North American Industry Classification (NAICS) code
  • Proof of payroll
  • Number of employees eligible for health insurance
  • Details for each employee: name, address, age, and number of dependents to insure

Whether you’re a health insurance beginner or a bonafide master, you’ll now be able to decide if you should offer health insurance once and for all. And then, you can see what you should consider if you move ahead with that decision. Visit this cheat sheet as much as you want, and then watch as you’re magically guided to the best possible choice to make your employees feel their best!

How 50+ Benefits Correlate with Employee Satisfaction

Glassdoor Economic Research explored the best industries for benefits and which benefits drive employee satisfaction. In both studies, we restricted the benefits we examined to those we had the most data for in order to rigorously study them: health insurance, vacation/paid time off, 401(k) plans, maternity/paternity leave, employee discounts and free food.

However, Glassdoor’s Benefits Reviews survey collects data on many more types of benefits. Employees can rate and review more than 50 distinct employer-provided benefits, while employers can verify the benefits they offer, providing a well-rounded picture what’s offered at hundreds of thousands of companies. The survey covers a wide variety of workplace benefits and perks, including pet-friendly workplaces, employee adoption assistance, travel concierge services, company cars, mobile phone discounts and more.

To dig deeper, we wanted to understand which of these 50+ perks and benefits matter most to employees.

One simple way to do so is to show the statistical correlation between individual benefits ratings (on a scale of 1 to 5) and how employees rate their overall satisfaction with benefits packages (again, on a 1 to 5 scale).

The table below shows the full list of correlations between 54 benefits tracked by Glassdoor and overall employee satisfaction with benefits packages. The correlations range between zero and one. A correlation near one means the benefit is a good predictor of employee satisfaction with overall benefits packages, while a correlation near zero means the benefit has little impact on employee satisfaction. In other words, which benefits are more important to employees and which are less important?

GD_54_BenefitsRanking

Overall, the above results echo the findings of our earlier study: The core benefits that matter most to workers are health insurance, vacation and paid time off, and retirement plans. These core benefits are most highly correlated with employee satisfaction with benefits packages.

At the bottom of the list, we see less common benefits like fertility assistance, employer-provided child care, and travel concierge services. These benefits have almost no correlation at all with employee satisfaction. While they may be quite valuable to some employees, the data suggest most workers place a low value on these benefits.

Interestingly, many headline-catching benefits such as pet-friendly workplaces, reduced and flexible hours, and gym memberships rank near the bottom of this list in terms of correlation with employee satisfaction. Even the much-discussed benefit of free lunch and snacks ranked 16th out of 54 benefits, well behind more prosaic and traditional benefits like retirement plans.

Although the above correlations are interesting, some caution is warranted in interpreting these findings. These are just simple correlations between benefit ratings, and don’t statistically control for factors like company size or industry as in our previous, more rigorous analysis of Glassdoor benefits ratings.

Despite these limitations, the lesson of the above table is clear. While less common benefits tend to dominate media coverage, employers should not neglect core benefits such as health insurance and paid time off. The data clearly show these benefits—while less exciting than many of today’s flashy workplace perks—are still the main drivers of employee satisfaction.

For employers looking to win top talent, providing a well-rounded total compensation package that includes core benefits, fair pay and desirable perks will help them compete in a challenging hiring landscape.

FSA Basics

Flexible Spending Accounts (FSAs), governed by Internal Revenue Code (IRC) Section 125, allow you to have pre-tax payroll deductions for certain medical and dependent care expenses. Section 125 also permits your insurance premiums to be taken on a pre-tax basis. This provides up to 40% tax savings to you.

Here are some FSA basics as defined in IRC Section 125.

  • Eligible medical and dependent care expenses are defined by IRC Section 125.
  • FSA elections can only be made during designated open enrollment periods or when you meet the eligibility requirements set by your employer.
  • Elections cannot be changed during a plan year unless the participant has a “qualifying event” as allowed by the IRS.
  • Refer to your Plan Highlights regarding unused FSA funds. Any forfeited funds are returned to your employer, but the IRS has imposed strict regulations on the use of these funds (they cannot be refunded to the employees who forfeited them).

Medical FSA

A Medical FSA allows you to set aside funds on a tax-free basis to pay for eligible medical services provided to you, your spouse and your dependents. Some eligible expenses may include:

  • Co-payments, co-insurance and deductible expenses
  • Dental care (e.g. exams, fillings, crowns)
  • Vision care, eyeglasses, contact lenses
  • Chiropractic care
  • Prescription drugs and certain over-the-counter medical items

A more extensive list of eligible expenses can be obtained from our office.

What are the limits for a Medical FSA? The maximum limit that an employee can contribute to a Medical FSA on a tax-free basis is set by the IRS. For 2018 plan years, elections cannot exceed $2,650. Your employer may establish a lower plan limit. Please review your plan highlights for your specific limit.

When are funds available? On the first day of the coverage period, you will have access to your full annual Medical FSA election.

Can I change my election? Generally, you are not able to change your FSA election once a plan year has started. There are certain life status changes that may permit changes, such as: marriage, divorce, birth of child.

Dependent Care FSA

A Dependent Care FSA allows an employee to set aside funds from payroll to pay for certain dependent care expenses. These expenses must be for a dependent child under the age of 13 or a spouse or other dependent adult who is incapable of self-care.

What are the limits for a Dependent Care FSA? The federal government sets the amount that can be contributed per calendar year to a Dependent Care FSA. The current amount is limited to the smallest of the following amounts:

  • $5,000 if single or if married and filing jointly.
  • $2,500 if married and filing separately.
  • The participant’s earned income.
  • The earned income of the participant’s spouse.

What expenses are eligible? In order to qualify, the care must be necessary to enable you and, if married, your spouse to work, look for work or attend school full-time. Some eligible expenses include:

  • Child care
  • Nursery school
  • Before- and after-school care
  • In-home dependent care
  • Adult care

Adjusted 2018 HSA Limits Announced

UPDATED MARCH 5, 2018. The IRS released Internal Revenue Bulletin 2018-10 indicating changes to the 2018 HSA Family contribution maximum. The family contribution maximum is being adjusted downward to $6,850 (from the previously announced limit of $6,900). This change may affect current and future contributions to HSAs. Please make any necessary adjustments to future contributions to accommodate the change. If you have already fully contributed for 2018, you may need to initiate an excess contribution removal. 

The IRS initially released the 2018 cost-of-living adjustments for Health Savings Accounts (HSAs) in May 2017. However, the passing of the Tax Reform Bill led to a recalculation of the limits. HSAs are subject to annual adjustments. HSA limits consist of the contribution limits, minimum deductible requirements and maximum out-of-pocket limits.

2018 HSA Contribution Limit

The HSA limits for contributions are set to increase in 2018. Individuals age 55 or older can continue to make an additional $1,000 catch-up contribution.

Individual: $3,450 (up from $3,400 in 2017)

Family: $6,850 (up from $6,750 in 2017)

HSA HDHP Requirements

The minimum deductible requirements are set to increase in 2018. For employers and individuals that are currently in a plan set at or near the minimum deductible limits, you will need to make adjustments to ensure your plan continues to remain HSA eligible.

Individual:
$1,350 minimum deductible (up from $1,300)
$6,650 maximum out-of-pocket (up from $6,550)

Family:
$2,700 minimum deductible (up from $2,600)
$13,300 maximum out-of-pocket (up from $13,100)

For individuals following the American Health Care Act, a bill has passed the House of Representatives and is up for consideration in the Senate.  If the American Health Care Act became law, it would further expand these limits and make HSAs more flexible.