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The CARES Act Offers Flexibility for HRAs, FSA & HSAs

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was created to provide economic assistance to families, workers, and businesses during these uncertain times. One important thing the CARES Act has done is to allow more flexibility for Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), or Health Reimbursement Arrangements (HRAs). Now, some over-the-counter medications and other common healthcare items will be eligible for reimbursement. Prior to the passage of this act, these medications were only eligible for reimbursement with a prescription.

illustration of 3 bottles of medications, one with green pills and one yellow — *The CARES Act has made over-the-counter medications eligible for reimbursement through HSAs, FSAs and HRAs.*

The Changes

If you are an employer who offers HSAs, FSAs, or HRAs, it is important that you make your employees aware of the new rules put in place by the CARES Act. They can now use their HSA or FSA to get reimbursed for over-the-counter medicine, as well as for healthcare items like feminine hygiene products. Before this act was passed, employees needed a prescription from their doctor just to get something as simple as Tylenol reimbursed through their HSA, FSA, or HRA. The change began retroactively as of January 1, 2020, which means reimbursements can be filed for over-the-counter medicine or other newly eligible products purchased anytime since January 1, 2020.

What Is Considered Eligible?

The CARES Act has made thousands of items eligible for reimbursement, including the following medications and healthcare products:

3 tampons over a stack of wrapped up pads — *Feminine hygiene products will also be covered for reimbursement.*

Acne medications
Sleep aids
Digestive aids, including laxatives
Tampons, pads, and liners
Cold, cough, and flu medicine
Allergy and sinus medicine
Anti-inflammatory medicine
Pain relievers
Baby rash ointments
Medications for eczema and psoriasis
Acid controllers

You and your employees might have had a rough year, but the government has been working on ways to lessen some of the burdens. These over-the-counter medications and other healthcare products being offered for reimbursement without a prescription will allow your employees to seek treatment for simple things without having to go to the doctor and pay a copay.

If you do not already offer a HRA or group insurance to your employees, but are considering choosing to help them with healthcare costs, EZ can help. We can review all the available plans in your area and help guide you towards the most affordable ones with the best coverage options. You care about your employees and we care about helping you find a plan that meets all your needs. We will provide you with one agent to work with you and compare all available plans in your area for free. To get instant quotes, simply enter your zip code in the bar above, or if you wish to speak directly with one of our agents, call 888-998-2027. There is no hassle or obligation.

Pre-Tax vs After-Tax Deductions

If you are thinking of offering group insurance or a HRA to your employees, or if you are already offering them one or both, you might be wondering how to withhold employee insurance premiums and your contributions from their paycheck. Do the deductions come out of their paycheck pre-tax or after-tax? In some cases, you can deduct their premium and your contributions from their paychecks pre-tax; other premiums may need to be deducted after-tax. It is important to know what kinds of contributions can be deducted pre-tax, as well as the advantage and disadvantages of doing so.

Pre-Tax Deductions

silhouette of a group of people standing in front of a large red heart. — *Group health insurance deductions can be taken pre-tax.*

Taking a pre-tax deduction means that you, the employer, withdraw money directly from your employees’ paychecks to cover the cost of benefits before income or payroll taxes are withheld. Internal Revenue Code (IRC) Section 125 allows for payroll deductions to be taken pre-tax for certain benefits, including:

Major medical coverage
Dental and vision insurance
Some retirement plans, such as 401(k) plans
Accident insurance
Cancer insurance
Healthcare Spending Accounts (HSAs)
Flexible Spending Accounts (FSAs)

In order to know which pre-tax benefits are exempt from state and local taxes, you will have to check your state and local laws.

What is the advantage of deducting premiums and contributions from your employees’ paychecks pre-tax? For employees, when premiums and contributions are deducted pre-tax, the amount of income that they have to pay taxes on is reduced, in some cases by up to 40%.

Doing this not only benefits your employees, it also benefits you; pre-tax deductions lower your tax liability, including the Federal Unemployment Tax (FUCA), State Unemployment Insurance (SUI) and FICA. For every dollar contributed to a retirement account, FSA or insurance plan, an employee’s taxable income is decreased accordingly. Your employees’ paychecks will effectively be lowered, meaning you will pay less in payroll taxes.

The drawback is that your employee might owe taxes on the money you withheld in the future. This is because they did not pay any federal, state, and local taxes on the contributions at the time they were withheld. These taxes were simply deferred. For example, when your employee retires and begins drawing on their 401(k), they will owe taxes on the money they use from their pre-taxed 401(k) plan.

After-Tax Deductions

caucasian female hand holding up hundred dollar bills. — *Contributions to retirement plans and other benefits are deducted after income and payroll taxes are deducted.*

After-tax premiums and contributions are deducted from your employees’ paychecks after income and payroll taxes are deducted. Unlike pre-tax deductions, these will not affect your employee’s taxable income. However, you and your employee will owe more payroll taxes with after-tax deductions. If premiums are deducted after-tax, your employees will not pay taxes when using the benefits in the future, such as when they withdraw money from a post-tax retirement or health arrangement plan. Common after-tax premiums include:

Some retirement plans (such as a Roth 401(k) plan)
Disability insurance
Life insurance
Major medical coverage purchased by an employee on their own

Need Help?

If you need help finding group insurance, a HSA, FSA, or HRA, then EZ.Insure can help. We want to make sure that you save as much money as possible, which is why we compare all plans in your area, for free. We will assess your business’ and employees’ needs and find the best plan that will help cut costs, not coverage. If you need help figuring out which plans qualify for pre-tax and post-tax deductions, we can help with that too. We will answer your questions and guide you through the process. To start comparing plans for free, simply enter your zip code on the bar above, or to speak directly with an agent, call 888-998-2027.

Most Common Employee Benefits

One of the best ways to attract and retain the best employees is to offer competitive benefits. These benefits can come in many forms and are an important part of any employee’s compensation package. One of the most important benefits to most employees is health insurance; in fact, 56% of employees would prefer a healthcare plan to a raise! When you offer employees benefits such as health insurance, they are not only healthier, but happier. And what comes of happy employees? Higher productivity that helps boost your bottom line! So take a look at your budget, and see if you can consider offering one (or more) of these common employee benefits.

How to Structure Your Benefits Plan

a man standing at a crossroad with one green sign pointing right to daylight and a red sign pointing left to a dark night — *You have 2 choices when it comes to offering health benefits to your employees.*

Generally businesses utilize two different structures when it comes to offering employee benefits:

Organizational-oriented benefits: Employers offer employees specific or defined benefits, such as traditional health insurance, a pension or other retirement plan, or wellness program. These benefits are employer-owned and employer-selected.
Consumer-oriented benefits: Employers offer employees employer-funded dollars to purchase their own benefits. When it comes to healthcare, this can be something like a QSEHRA or ICHRA, both of which would allow you to reimburse your employees for wellness and medical expenses.

Health Insurance

Health insurance is a must for many people when they’re looking for a job, and also the reason that many employees choose to stay in a job. In fact, research shows that 78% of employees are more likely to stay with an employer if they are offered health insurance. Many employees are interested in traditional healthcare plans, because they provide the most comprehensive benefits for them and their families.

If you choose not to offer a traditional health insurance policy, you do have other options, but not offering any kind of healthcare plan can end up costing you. Losing even one employee can cost you 50-400% of their annual salary. If you are unsure whether you can afford a group health plan, remember that there are a variety of group health insurance plans to choose from, and many are more affordable than you might think. This is especially true when you consider how important this benefit is to employee retention! To find out what plan is right for you, speak with an EZ agent.

Flexible Spending Accounts (FSAs) or Health Savings Accounts (HSAs)

In addition to offering a healthcare plan to your employees, you can also choose to offer a FSA or HSA. Both of these types of accounts allow employees to put tax-free money aside for qualified medical expenses, but they have a few differences. FSAs work with nearly any health insurance plan, but if your employee does not use the money by the end of the year, then they will lose it. With a HSA, the money employees put aside will continue to roll over for as long as they have the account. Unlike FSAs, though, HSAs must be paired with a High Deductible Health Plan.

Dental & Vision

You can also choose to offer your employees dental and vision care. Dental and vision coverage is cheaper than health insurance and so is much more affordable to offer. Employees with families or those who have issues with their vision will find these benefits especially important.

Retirement Savings Plan

A retirement savings plan, or 401(k) plan, is a great way to help your employees save towards their retirement. You can offer a certain amount to match their contributions. For example, many companies offer up to a 4% match to what their employees contribute to the plan.

Paid Time Off

This is a great benefit to offer your employees. Being able to go on vacation and get paid for it is great for your employees’ morale. In addition, being able to call in sick and not have to worry about losing a day of pay is essential for many, especially employees with families.

Short-Term Disability

Offering short-term disability means that employees will continue to get paid if they cannot work after experiencing an injury or illness. Employers continue to pay a percentage of employee’s income until they are able to come back to work.

Wellness Programs

These programs have grown in popularity over the years. Wellness programs help employees get healthier by providing benefits such as gym membership stipends. These programs don’t need to focus solely on physical health: according to one study, 73% of employers have mental wellness programs for their employees.

When it comes to choosing which benefits to offer your employees, you can’t go wrong with health insurance. If you are looking for a group health plan, there are some things to consider, such as making sure you are following state regulations, and that you are getting the most benefits for the best price. EZ.Insure agents can check all these boxes and more, because we work with the top-rated health insurance companies in the nation. We will compare plans in your area and find a plan that fits your budget, and makes your employees happy. To get free instant quotes, simply enter your zip code in the bar above, or to speak to an agent, call 888-998-2027.

Can Employees Have Both A HRA & HSA?

Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs) are both great options for employees and employers who want to save money on group health insurance costs. Many employers and employees wonder if they can have both at the same time, and the answer is: yes! If you are willing to offer your employees both, a HRA and HSA, you need to have an understanding of how the two benefits interact with each other in order to get the most out of each.

The Difference Between HSAs & HRAs

HSAs are savings accounts that work alongside your employees’ health insurance plan. Employees are only eligible for a HSA if they are enrolled in a qualified high-deductible health plan. Your employees can contribute money to the account, which then acts like a bank account for medical expenses; you can also contribute to their HSAs, and receive some of the tax benefits. The money that you both contribute is pre-tax, earns tax-free interest, and will not be taxed when employees withdraw it to use for qualified medical expenses.

HRAs are not savings accounts like HSAs, they are arrangements that allow employers to reimburse employees for medical expenses. They are intended to help employees pay for out-of-pocket health-related expenses, and are often used in place of a traditional group health insurance plan. Depending on the type of HRA you offer, there may or may not be a limit on the amount that you can reimburse your employees in a given year.

The Different Types of HRAs

First, let’s take a look at the different types of HRAs you can offer your employees. There are integrated HRAs, which are offered alongside traditional group health insurance, including:

5 different colored signs on a pole pointing in different directions. — *There are 5 different HRA types to choose from to offer your employees.*

ICHRAs (Individual Coverage Health Reimbursement Arrangements), which allow tax-free reimbursement of benefits for any size business, and for any amount.
EBHRAs (Excepted Benefit HRAs), which are limited to paying for excepted benefits, such as premiums for vision and/or dental coverage and premiums for plans that are exempt from ACA rules (short-term plans).

Standalone HRAs do not have to be tied to a group plan. These include:

QSEHRAs (Qualified Small Employer HRAs) – These are meant for businesses with less than 50 employees that do not offer a group insurance plan. Business owners can set up a QSEHRA for their employees to help pay for benefits tax-free.
Spousal HRAs– These are for employees who are covered by a spouse’s group plan. They cannot be used to reimburse employees for their premium payments.

Retiree HRA– These are for former employees. They allow you, the employer, to help pay for any retired members’ insurance premiums and medical expenses.

When Offering Both HSAs & HRAs

In order for your employees to be eligible for a HSA, they must have a high-deductible health insurance plan (HDHP) that is HSA-qualified. If you choose to offer a HRA and a HSA, then the HRA has to follow the same rules as a HDHP, and cannot begin paying out until your employee’s minimum “deductible” amount is met.

male caucasian dentist looking in the mouth of a patient — *Limited-purpose HRAs will reimburse employees for expenses exempt from HSA deductible, such as dental work.*

Another way to offer a HRA that is HSA-qualified is by offering a limited-purpose HRA that only reimburses employees for expenses that are exempt from the HSA deductible requirement. Expenses exempt from the HSA deductible are:

Health insurance premiums
Dental
Vision
Long-term care premiums
Wellness and preventive care such as check-ups and quitting smoking or weight loss programs

You want to help your employees with their healthcare costs, but there is nothing wrong with also wanting to offset the costs of group health insurance. One way to do this is by offering both a HRA and a HSA. It can be done! As long as you follow the guidelines, then everyone can benefit from these arrangements. If you are unsure or need some help, then we can assist you. To compare plans, and to find a plan with the most coverage and savings, enter your zip code in the bar above. Or to speak directly to one of our licensed agents, call 888-998-2027.

2021 HSA Contribution Limits

Each year, the IRS sets contribution limits for Health Savings Accounts (HSAs). This year, HSA contribution limits are up by about 1.5% from 2020’s amount. New contribution limits for 2021 are going up $50 for individuals and $100 for families. Limits are set based on a calendar year. and the allowable contribution is prorated by the number of months an individual is eligible to contribute to an HSA.

What Is A HSA?

A HSA is a tax-exempt savings account that employees can use to pay for qualified health expenses. Individuals eligible to contribute to a HSA can make contributions to it at any point during the tax year. To be eligible for a HSA, one must:

Be covered by a qualified high deductible health plan (HDHP)
Not be enrolled in Medicare
Not be claimed as a dependent on someone else’s tax return

Based On Inflation

Contribution limits for the following year are based on the rate of inflation. To determine this year’s contribution limits, the IRS used a 12-month period calculation ending in March 2020. The annual limit on HSA contributions for this year is $3,600 for individuals and $7,200 for families. Employees aged 55 and older with a HSA account can contribute an additional $1,000 on top of the maximum as a catch-up contribution to support their savings as they near retirement.

High deductible health plan out-of-pocket limits went up for both self only coverage and family coverage.

Contribution limits are not the only things that are affected by inflation. Each year, the IRS also sets minimum deductible amounts and maximum out-of-pocket limits for HDHPs. For 2021:

Self-Only Coverage with a HDHP:

Minimum deductible for a HDHP to be HSA-qualified: $1,400 ($0 change from 2020)
Maximum HDHP out-of-pocket limit: $7,000 ($6,900 in 2020)

Family Coverage with a HDHP:

Minimum deductible for a HDHP to be HSA-qualified: $2,800 ($0 change from 2020)
Maximum HDHP out-of-pocket limit: $14,000 ($13,800 in 2020)

What You Should Do

As an employer, you need to make sure that your employees are aware of these new limits. Communicate to your employees that:

The out-of-pocket maximum for a family high-deductible health plan is $14,000.
All non-grandfathered plans have to cap out-of-pocket spending at $8,550 for any covered person. A family plan with an out-of-pocket maximum of $8,550 can meet this by embedding an individual out-of-pocket maximum in the plan that is no higher than $8,550.
High deductible health plans cannot have an embedded family deductible that is lower than the minimum HDHP family deductible of $2,800.

HSAs are a great savings tool to have in your belt. Offering them to your employees will lower your group insurance costs, while allowing employees to help pay for their medical expenses. If you are interested in offering your employees insurance or a HSA, an EZ agent can help. We will do all the research and comparing for you and find you the plan that will best suit your business. To compare quotes within minutes, at no cost, enter your zip code in the bar above, or to speak to an agent, call 888-998-2027.

Effective Ways To Reduce Group Costs

One of the best ways to attract better employees is by offering group health insurance. Unfortunately, providing high quality health insurance usually means that your business is going to pay a lot for premiums. With premium prices soaring, many small businesses are struggling to continue offering group health insurance to their employees. In fact, according to the US Chamber of Commerce, of the more than 45 million Americans who are uninsured, 60% are employed by small businesses. If you want satisfied, productive, and healthy employees, but are struggling to provide the health insurance options they’re looking for, here are some tips to reduce your group costs.

Get More Employees to Participate in Your Plan

In order to get a good price on group health insurance, make sure that as many of your employees are participating in your plan as possible. If you’re in the financial position to do so, you can even consider hiring more employees – the more employees that you cover, the lower your premiums will be. How will your premiums be lower? Well, insurance companies face large risks for every employee that they have to cover, so having a smaller pool of employees paying into the plan means that they are taking on more risk. However if you have a larger amount of employees paying into the plan, then there will be less risk for the insurance company, and they will be able to offer you a better deal.

Reduce Coverage: Exclude Dental & Vision

Reducing the amount of coverage that you offer is a simple way to keep your insurance costs low. You can do so by cutting dental and vision from your plan and having your employees decide whether they would like to purchase their own dental and vision coverage. These costs will come out of your employees pockets, but eliminating these plans will help to lower your premium costs and save you money.

Consider Switching Plans

The most common way to control the costs of your group insurance plan is by switching plans. Consider switching to a high-deductible health plan (HDHP). Doing so will increase your employees’ deductibles, but it will also reduce the cost of their premiums, and your premium contributions. Another route you can take is switching to a more cost effective plan with a smaller network, such as an HMO.

money on a table near some prescription medications — *There are different ways you can save on prescription medication costs.*

Take Control of Prescription Drug Costs

Medications are necessary, but they can be expensive. There are ways, though, to save on prescription drug costs in your plan by:

Having a plan that mandates a generic substitution for any medication that has one.
Having a limit on coverage, which will allow you to save on dispensing fees.
Encouraging your employees to shop at less expensive pharmacies, use money-saving apps, or request 90-day supplies of their medications.
Checking your plan’s drug formulary, and making sure that it includes a large range of drugs in the lowest tier. These generic, lower cost drugs will most likely be covered 100%.

Keep Your Employees Healthy

The healthier your employees are, the lower your insurance costs will be. Offer a wellness program, which could include perks like fitness membership stipends, free flu shots, help quitting smoking, and cancer screenings. This is a cheap and easy way to not only make your own employees happier and more productive, but also a great way to save money in the long run.

Provide An HSA

If you decide to switch to a high-deductible health plan (HDHP), consider offering a health savings account (HSA) alongside it. HSAs are only available with a qualified high-deductible health plan, and will allow your employees to contribute tax-exempt dollars to a fund that can only be used for medical expenses. These funds also accrue tax-free interest and roll over each year, so employees will have money for healthcare when they really need it. The benefits for you? Tax breaks for you if you choose to contribute to your employees’ HSAs, and a healthcare plan that is more attractive to your employees.

Find A Good Agent

Health insurance is complex. But if you have a good insurance agent, they can help you shop around for plans from different providers and help you to reduce your health insurance costs. Many insurance agents charge a fee for their services, but not EZ. We will provide you with one dedicated agent who will navigate through all available plans and provide you with instant, accurate quotes. All of our services are free – our mission is to help you find an affordable plan that provides great coverage. To compare group insurance quotes in minutes, simply enter your zip code in the bar above, or to speak to one of our agents, call 888-998-2027.