Whats the best type of account, FSA, HSA, HRA?

As people navigate their individual health concerns both large and small, employer-sponsored flexible spending accounts (FSA), health savings accounts (HSA), and health reimbursement accounts (HRA) offer a variety of advantages—on top of the tax savings. 

While there are differences between how these accounts can be spent or saved, most are defined by the IRS Section 213(d) eligible expense list. 

Estimates show FSA holders have forfeited close to $7 billion since 2019.  

Many people give up funds simply because they aren’t aware of the true number of items and services they can use with their account. While it is best practice to save HSA dollars for a rainy day, as we near the half-way point for 2022, it’s good employees know what options are at their disposal, so they can make informed health care decisions before the deadline makes it for them.  

Most consumer account holders are well aware of the option to pay for office visits, hospitalizations, and medications. But, the IRS approved the addition of over-the-counter treatments, feminine care items, and COVID-19 personal protection equipment (PPE) items since 2020, greatly increasing the list of eligible items for these accounts in recent years.  

Additionally, the IRS also provided some deadline extension relief for employers to adopt. 

For people with chronic conditions or disabilities, account dollars can be used to dramatically improve quality of living.  

 Typically, in the spring, communications focus on eligible allergy items medications, inhalers, and nebulizers as they are all covered items. However, as we observe a series of important causes (Disability Awareness Month in March, Autism Acceptance Month in April, and Mental Health Awareness Month in May) we wanted to ensure parents and caregivers had information about the types of support consumer accounts can provide for members and their dependents. 

The IRS 502 publication is the key document governing acceptable items and services. Ultimately, the IRS and any subsequent tax audits determine the eligibility of an item or service; however, most administrators of these plans use discretion in approving items that may not be specifically listed but fall into the category of “costs of diagnosis, cure, mitigation, treatment, or prevention of disease…(and) include the costs of equipment, supplies, and diagnostic devices for these purposes.” In this document, there are many allowances for items and even home improvements specifically for physically or mentally disabled dependents. 

Some notable items and services that are covered: 

• Artificial limbs 
• Hearing aids 
• Braille books and magazines  
• Capital Expenses for special equipment installed in your home to accommodate a person with a disability or to help provide care (an entrance or exit ramps, widening doorways or hallways, modifying cabinets or equipment, adding handrails or grab bars, etc.) 

• Mobility devices, such as crutches, walkers, canes, wheelchairs 
• Medical alert devices  
• Eating, grooming, or dressing aids 
• Guide dogs or service animals, including buying, training, maintaining the animal 

• Medical expenses related to housing an intellectually or developmentally disabled person in a special facility 
• Specific special education expenses—tutoring for learning disabilities by a qualified teacher, cost for special education schooling (learning disabilities must be the primary reason for attending the school) 
• Special equipment (and the costs of any repairs) for communications such as telephone equipment, teletypewriter, or telecommunications device for the deaf (TDD) 
• Adapter for audio equipment (television) for hearing disabled participants or dependents 

• Wigs for patients with disease or treatment-related hair loss 

Awareness is key to helping employees take advantage of their funds.  

As you can see, several options are available for those with FSA or (medical) HRA funds and potentially a “good” expenditure for an HSA if the item or service isn’t something you can afford with your current budget. 

Consumer accounts help employees achieve greater financial wellness while prioritizing their health. A year-round benefits communication strategy, highlighting those unexpected eligible expenses, helps those who need extra support for their own or for their dependents’ disabilities or medical needs. 

FSAs, HSAs, and HRAs are great savings tools for employees to help them supplement their health plans and savings goals. Learn more about selecting a consumer accounts administrator that fits your needs, check out our e-book: Find an Easy Button for Your Consumer-Directed Accounts.