Whether you are a participant exploring your benefit options or an employer preparing a benefits package, you may have formed certain myths about pre-tax benefit accounts.
In a perfect world, we would all have a clear understanding of the different types of accounts that exist and understand how each can provide certain benefits and advantages. But, more often, we are all a little fuzzy on the details. This “fuzzy” factor is what sometimes leads to myths and misconceptions about how each of the accounts work. To help cut through the “fuzzy” factor, we present 5 Myths (and Facts) about Pre-tax Benefit Accounts.
5 MYTHS About Pre-Tax Benefit Accounts
Pre-tax employee benefits can deliver major savings for employees and provide a great incentive for prospective hires. But those benefits only offer value if employees understand and take advantage of these programs. Here are a few myths – and facts – about pre-tax benefits.
HSA COVERAGE
Myth: A Health Savings Account (HSA) only covers individuals covered by the qualified health plan.
Fact: HSAs can cover any qualifying spouse or tax dependent, regardless of their enrollment in the qualified health plan. However, adult children who are covered but file independently would not be covered by the HSA.
HSA FUND ROLLOVER
Myth: You’ll lose your HSA funds if you don’t use them, or your employer decides not to roll them over, by the end of the year.
Fact: Your HSA funds roll over automatically each year and go with you if you change jobs.
CHANGING YOUR HSA
Myth: You can only change your HSA contribution amounts following a life event – marriage, childbirth, family death, etc.
Fact: HSA contribution amounts can be changed at any time for any reason, although your employer can restrict changes to one per month for administrative reasons.
AUTOMATIC HRA COVERAGE
Myth: You, your spouse, and your dependents are automatically covered by a Health Reimbursement Account (HRA).
Fact: Your HRA covers anyone – you, your spouse, eligible dependents, etc. – who is also covered by a group health plan and listed as an eligible dependent on your HRA.
HRA FUND DEPOSITS
Myth: You can deposit funds directly into your HRA.
Fact: Your employer makes tax-free contributions to your HRA, which you, as an employee, can use to cover certain medical expenses.
Benefit Resource aims to help you break down these myths and better understand how you can create comprehensive solutions for your employees. If you are interested in learning more, please contact us or request a proposal.
