By Jerry Geisel, Crain News Service
BOSTON (Aug. 27, 2013) — Most employees don't know the basic difference between health savings accounts (HSAs) and flexible spending accounts(FSAs), according to a new survey.
Nearly 75 percent of those responding to a survey by Fidelity Investments, a unit of Fidelity Brokerage Services L.L.C., said HSAs were pretty much the same thing as FSAs, or they were unsure of how FSAs and HSAs differ.
The most significant difference is that contributions made to HSAs, which must be linked to high-deductible healthcare plans, can be rolled over to pay for succeeding years' out-of-pocket healthcare expenses.
By contrast, under a decades-old Internal Revenue Service rule, unused FSA balances are forfeited if not used by the end of a plan year. In the case of employers that adopt a grace period, FSA balances that remain at the end of a plan year can be used to pay healthcare expenses incurred during the first two and a half months of the next year.
Another big difference—set by the healthcare reform law and which took effect this year—is that the maximum annual contribution that can be made to an FSA is capped at $2,500.
By contrast, the maximum contribution that can be made to an HSA this year is $3,250 for employees with single coverage and $6,450 for employees with family coverage.
"It's clear more can be done to educate employees on the numerous benefits of HSAs, from saving for current and long-term qualified medical expenses to factoring healthcare costs into retirement planning," William Applegate, a Fidelity Investments vice president in Boston, said in a statement.
Released Aug. 20, the survey queried more than 1,800 adults, of which just over 300 were enrolled in a healthcare plan with an HSA, and another 300 who declined to enroll in the HSA-linked healthcare plan and instead opted for a more traditional healthcare plan.
This report appeared in Business Insurance magazine, a Chicago-based sister publication of Tire Business.