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Cafeteria plans can help employees enjoy payroll tax savings for the health expenses they incur. Help employees take full advantage of these plans and the perks they bring with these helpful facts.
Flexible Spending Accounts (FSAs): FSAs allow employees to be reimbursed for certain medical expenses. They are employee-funded, generally through voluntary salary reduction agreements. The funds can roll over, but with limitations.
Health Reimbursement Accounts (HRAs): HRAs also reimburse employees’ tax-free for qualified medical expenses, but unlike an FSA, HRAs must be funded solely by an employer. The dollars can roll over, but they cannot be credited directly to the employee; they belong to the employer if the employee is terminated or leaves their employment. Additional considerations with HRAs:
Health Savings Accounts (HSAs): An HSA can only be offered to individuals covered by a high deductible health plan (and with no other “first dollar” coverage). Contributions can be made by the employee and/or the employer, and unused funds can be rolled over each year. The funds belong to the employee – even if they are terminated or leave their employment.
This material is intended to provide general information about an evolving topic and does not constitute legal, tax or accounting advice regarding any specific situation. Aflac cannot anticipate all the facts that a particular employer or individual will have to consider in their benefits decision-making process. We strongly encourage readers to discuss their HCR situations with their advisors to determine the actions they need to take or to visit healthcare.gov (which may also be contacted at 1-800-318-2596) for additional information.
1Internal Revenue Service (2016). 26 CFR 601.602: Tax forms and instructions. Rev. Proc. 2016-55. Accessed on Oct. 26, 2016 from https://www.irs.gov/pub/irs-drop/rp-16-55.pdf.
2United States Treasury Department (2013). Treasury modifies “use-or-lose” rule for health flexible spending arrangements. Accessed on Feb. 4, 2016, from http://www.treasury.gov/press-center/press-releases/Documents/103113FSA%20Fact%20Sheet.pdf.
3Internal Revenue Service (2013). Internal Revenue Bulletin: 2013-40. Accessed on Feb. 4, 2016, from https://www.irs.gov/pub/irs-irbs/irb13-40.pdf.
4Internal Revenue Service (2016). 26 CFR 601.602: Tax forms and instructions. Accessed Oct. 5, 2016, from https://www.irs.gov/pub/irs-drop/rp-16-28.pdf.