Which Health Spending Account Is Right for Your Business?
Tim Schuster, a manager in EisnerAmper’s Private Business Services Group, examines the differences between health savings accounts (HSAs), health reimbursement accounts (HRAs), and flexible savings accounts (FSAs). Tim looks at things like who funds the plan, who owns it, taxation, contribution limits and what happens to unused funds at year’s end.
Dave Plaskow: Hello and welcome to the Bottom Line. This podcast examines the everyday business and finance issues faced by closely held and private businesses. We hope to provide you with news you can use in what we like to think of as a jargon free zone. I’m your host Dave Plaskow, and with us is Tim Schuster, a manager in EisnerAmper’s Private Business Services Group. In this episode we’ll discuss the main types of employer provided health spending accounts. Tim, good to see you again.
Tim Schuster: Dave, let me tell you, it’s a pleasure to see you as well.
DP: So before we get into the differences Tim, what is the commonality among a Health Saving Account, has; Health Reimbursement Account, HRA; and Flexible Spending Account, FSA?
TS: Well, they’re all designated to pay for qualified medical expenses using a tax free fund.
DP: Let’s start with the HSA.
TS:So there’s a couple of facts here about an HSA that are applicable to pretty much everybody. An employee or an employer can fund this completely tax free. An employee needs to be enrolled in a high-deductible health plan, that’s very important. Funds can roll over year to year if they are not used. The employee, not the company,owns the account. There are annual contribution limits to each account limited to whatever account is set up by the employer, and they can be used as an investment vehicle subject to market forces. So, of course, if the market is doing well, more likely than not your HSA accounts can also be doingwell. There are actual contribution limits,. Contribution limits are $3,450 for the individual and $6,900 for a family.
DP: Now let’s move on to the HRA.
TS:They are funded and owned solely by the employer. Now one thing to keep in mind is that these are not via a payroll deduction. Unused money will go back to the employer, which can continue to fund the HRA. You can continue funding this account if the employer can utilize these funds in that fashion. Employers reimburse employees only after employees incur approved medical expenses. So you do have to go through an approval process first, before an employee can use those funds.
TS:There is a maximum amount of qualified expenses for a coverage period. And some HRA types do not have a minimum or maximum employer contribution limit. For a traditional HRA there are no limits.
DP: And finally FSAs.
TS: Of course. You’re getting a little alphabet soup here.
DP: Not me, the government.
TS:So with the FSA an employee sets aside a portion of earnings for qualified medical expenses for the employee, the spouse, and the dependents. These are not – NOT – subject to payroll taxes. The amount that can be saved is limited to $2,650 medical per person per year and $5,000 for dependent care. Employees can carry up to about $500 into the following yearand the rest they will lose. There are several types such as medical or dependent care FSAs and that can be talked about a little later as well and employers can match but are not required to match what’s in an FSA. That’s huge too.
TS:Employers are not required to do that. Also, probably worth mentioning that 2% owners or more of pass through entities are not eligible to participate in an HRA or FSA. The owners can only participate with an HSA.
DP: Now for closely held businesses that are considering setting up a health care spending account for their employees, what should they look for from their business advisors, from people such as yourself?
TS:Well, actually one thing I just want to talk about briefly is how EisnerAmper is actually a full advisory firm in that fashion. You know, this is a very common thing where our clients will come to us trying to figure out what is the best course of action for either setting up an HSA, an HRA or an FSA. But things to kind of think about, too, if it’s not one of us here that’s helping you is just make sure you work with your benefits and your tax advisor to examine the pros and cons of each option and to see what’s best for your company. You know, you’ll need to examine the correlation among, one, the health plan, two, an employee contribution, and also what the employer cost put is because this is a cost to the company, so there’s one thing’s you want to do is try to mitigate those costs by using your tax advisor, your business advisors.
DP: Right. And it sounds like it’s not one size fits all. These are really custom to each company.
TS:Exactly. It truly is. It’s one of those things where you do have to do a little shopping and your homework on.
DP: Ok, well Tim, thanks for this valuable information.
TS:Oh, it’s my pleasure Dave.
DP: And thank you for listening to the Bottom Line as part of the EisnerAmper podcast series. If you have any questions or there’s a topic you’d like us to cover email us at contact@EisnerAmper.com. And visit EisnerAmper.com for more information on this, and a host of other topics.
Lindsey Gross of EisnerAmper’s Outsourced Finance and Accounting Group joins Tim Schuster from Private Business Services to discuss the differences between these two areas, client case studies that demonstrate those differences, and which types of client could benefit from each.
The Bottom Line looks at how you can use social media to grow your business and examine the different communication platforms available including Facebook, Twitter and LinkedIn. You really need to develop website content and push it on social media platforms.
Tim Schuster, a manager in EisnerAmper's Private Business Services Group, discusses new NJ legislative initiatives happening in Trenton that you should be aware of. The first is the New Jersey Family Leave Act and the second is the increase in NJ's minimum wage.
In this episode of The Bottom Line, EisnerAmper Private Business Manager Tim Schuster discusses developing a quarterly planning calendar, including budget, tax planning and speaking with your trusted advisor. Review these concepts monthly from an accounting perspective.
In the wake of the government shutdown, Tim Schuster offers tips on creating an emergency fund. To avoid living paycheck to paycheck, Tim suggests putting money into a separate savings account, as well as a portion of any windfalls. Emergency funds should include medical expenses.
Tim Schuster from EisnerAmper’s Private Business Services Group talks about the family issues and financial burdens for members of the sandwich generation - those individuals who are responsible for raising their children as well as caring for aging parents.
As New Jersey initiates paid employee sick leave The Bottom Line examines the requirements for business owners. Some reasons for which employees can use sick leave include an employee's own personal medical treatment or legal services, or that of a family member.
EisnerAmper’s Private Business Services Group Manager discusses the current unemployment rate and the booming economy despite current trade tariffs. To help attract employees, businesses are offering incentives such as assisting with student loans to attract millennials.
EisnerAmper’s Private Business Services Group partner discusses estate planning and the need to have a will - from an online provider or an estate planning professional - to help your heirs understand your estate asset wishes and the Tax Cuts and Jobs Act estate tax thresholds.
The Bottom Line looks at some of the common IRS scams out there and what you should do if you fall victim to one of these scammers, including email and personal data hacks, ID theft and fraudulent returns. Contact your accountant if you think you’re a victim of a scam
The landmark Supreme Court decision in the Wayfair case on e-commerce taxation allows states to collect sales tax on e-commerce companies, even without brick and mortar locations in that state, affecting all e-commerce companies such as Amazon. Accountant guidance is suggested.
This podcast discusses the New Jersey Department of Labor and the employee or independent contractor (freelance work) classification under new Tax Cuts. A DOL audit might look at your Facebook and LinkedIn, and can also change your employee or contractor classification.
This episode of The Bottom Line looks at New Jersey Governor Phil Murphy’s inaugural NJ budget. The discussion includes the Governor's proposed New Jersey's state tax on Uber and Airbnb, addressing tax loopholes for hedge funds and New Jersey tax's effect on the gig economy.
In this episode of The Bottom Line, Tim Schuster discusses some of the individual taxation questions bubbling up from clients in the wake of tax reform including adjusted gross income changes, private business taxation, QBI, and the importance of talking with your tax advisor.
This episode of “The Bottom Line” discusses new tax reform changes including C corp and individual taxpayer changes, NOLs, double taxation and bonus depreciation. Tim Schuster came up with a top seven list of business tax reform questions he's been receiving from clients.
In this episode of “The Bottom Line,” Tim Schuster talks about the benefits of retirement savings plans for small businesses, including SEP IRAs, SIMPLE IRAs, and Solo 401(k) plans, as well as eligibility and contribution limits set for small business contributions.
Tim Schuster discusses how starting a college savings account – sooner rather than later – can help alleviate sticker shock for your child’s college education. He talks about the different state-sponsored 529 plans, what you can use the money for, the tax benefits and more.
EisnerAmper's Tim Schuster looks at several categories of SBA loans for working capital. He covers the loan approval process, SBA 504, real estate exclusions and how business advisors can help you make the most of the Small Business Administration (SBA) loan process.
EisnerAmper’s Tim Schuster tackles the issue of succession planning - Companies should have something written down for succession planning purposes as well as take into consideration estate planning, wealth management and valuation when creating their transition plan.
EisnerAmper's private business manager, Tim Schuster discusses the need for proactive disaster planning for private businesses, as well as business interruption insurance in the event that your disaster planning fails. FEMA offers online disaster planning recovery courses.
In this episode, Our private business services advisor Tim breaks down what a closely held business is, the different business formats such as LLC LLP and S Corp, and how this impacts the role of business advisors so your accountant, banker and lawyer will all be on the same page.