By - October 28, 2019

Improve Your HSA Education When You Tackle These 6 Myths

Improve Your HSA Education When You Tackle These 6 Myths

In some ways, becoming a benefits professional is to become a teacher. From strategizing open enrollment campaigns to planning benefits fairs, you are always educating employees on benefits. Sometimes that means highlighting the advantages of a high deductible health plan (HDHP) or hosting a lunch-and-learn about qualifying for lower insurance premiums with health screenings. 

And other times, informing your employees involves HSA education.  

Healthcare Savings Accounts (HSAs) provide several benefits for employees with HDHPs. However, there’s a good chance your workforce holds a least one misconception about having an HSA.

In this article, we’re sharing 6 HSA myths you’ll want to address in your HSA education. See if you recognize any of them below.

Myth #1: I must pre-fund an HSA to get the tax break.

As you are providing HSA education, you might discover employees think it’s necessary to allocate funds for their HSAs.

This is true about FSAs (flexible spending accounts). The IRS says, “At the beginning of the plan year, you must designate how much you want to contribute [for the full year].” But it’s not the case for HSAs.

The only requirement for the HSA tax break is having an open account at the time of a qualified medical expense. Later, employees can place funds in their HSAs to reimburse any qualified out-of-pocket expenditures. It might help to give your employees a concrete example of how this works.

For instance, an HSA can have a $0 balance on January 2. An employee can then undergo a $7,500 surgery on January 3. However if the HSA is open, the employee can fund the HSA later and repay himself…even if it’s years later.

Myth #2: I only have to open an HSA if I know I’ll have medical expenses.

Your employees might mistakenly think —because they never visit the doctor (except for their free wellness checkup)—there’s no need to open an HSA. After all, why budget for an expense that might never occur?

But as you educate employees on benefits, be sure to emphasize: To pay for expenses with tax-free money, employees don’t need a funded HSA, but they need an open HSA. An employee can’t visit the doctor and afterwards open an HSA for reimbursement.  In your benefits communications, point out unexpected healthcare expenses occur. No one anticipates breaking an arm or needing an appendix removed. So it’s better to open that HSA now.

Important tip: Be sure to mention opening an HSA is required for employer contributions. Skipping this step means your employees potentially miss out on free money.   

Myth #3: I can only change my payroll deduction once a year.

Be sure you address this myth when providing HSA education! The reality is, HSA contributions are variable. There are no rules for when or how many times an employee can adjust contributions.

Let’s say an employee schedules three medical tests for September. He can increase his contribution limits during the summer to prepare for those expenses. In November, he can then decrease contributions to a minimal amount.  

However, make sure you inform employees HSA contributions have a limit. (You can find the current IRS rules here.) This is particularly important if your organization offers HSA contributions.

Let’s say an employee has the IRS HSA cap of $3,500 and your organization offers $1,000 in HSA funding. If the employee places $250 per month in his HSA, he will contribute $3,000 to his HSA in 12 months. Your employee might think he has nearly maxed out contributions, but the employee has exceeded the IRS cap. With the employer contribution, the employee has gone $500 over the IRS limit and will incur a penalty.   

Myth #4: If I have single coverage, I can only use my HSA for my own health expenses.  

An employee can easily make this mistake. Make sure your HSA education busts this myth—so your workforce fully leverages their accounts.

Explain that any person an employee claims on tax returns can benefit from HSA funds whether that’s an employee’s 15-year-old child or 85-year-old mother. And dependents don’t need to share the same health plans with your employees.  

As you educate your employees remind them if a spouse has an HSA, then the combined maximum contribution of the couple is the family limit.

Important tip: Do your employees know an HSA can pay for Medicare B and D premiums? However, mention Medigap and supplemental coverage are not eligible expenses.

Myth #5: I’ll lose my HSA funds at the end of the year.

If your employees believe this myth, there’s a good chance they’ve heard about (or have experienced) the use-it-or-lose-it rule for FSAs. However, the beauty of an HSA is it rolls over.

It’s important to educate employees on benefits by explaining how there’s no expiration date on HSA funds. HSAs belong to employees, not organizations. And your employees are free to use their HSA money anytime and anywhere (on qualified expenses) even if in a year while working at another company.  

Myth #6: You can have an HSA and FSA at the same time.

Help your employees understand HSAs and FSAs are mutually exclusive. While an employee can have an IRA and 401K at the same time, the reverse is true for HSAs and FSAs.

But help your employees know there is a silver lining! Workers can have a limited purpose FSA (LPFSA) simultaneously with their HSA. If an employee’s HSA is maxed out, this can be an option for contributing additional funds toward healthcare expenses.

The only catch? Your employees’ LPFSAs can only cover dental and vision expenses. 

Take Your HSA Education Beyond Myth-Busting

Educating your employees on the benefits of their HSAs may start with busting myths. But it doesn’t stop there. Once you’ve addressed these 6 misconceptions, you’ll want to get your employees excited about using their HSAs.

To increase engagement, we’d recommend highlighting how employees can leverage HSAs in a way that suits their financial preferences.  

In our eBook, How to Increase HSA Engagement for 3 Employee Personas, we cover three types of HSA users you might find in your organization. In addition to explaining the characteristics of these HSA personas, we share how to tailor your benefits communications for each employee type.

To get started, download How to Increase HSA Engagement for 3 Employee Personas. 

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