Bridge the Generation Gap with Reimbursement Accounts
According to a Pew Research Center analysis of U.S. Census bureau data, millennials make up the largest generation in the U.S. labor force, accounting for one in three participants.1 They’re also projected to become the largest overall generation this year, and some studies predict the generation after them, Gen Z, will prove even larger.3 With this in mind, it’s important to make sure your benefits package reflects the needs of your changing workforce to encourage participation and stay competitive in attracting talent.
One key emerging trend is that millennials and Gen Z aren’t engaging with traditional medical models. A study from Accenture shows these consumers are least likely to have a primary care physician4 compared to previous generations and “are the most dissatisfied with the quality of traditional healthcare services.” Because of this, they are increasingly looking to alternative options, like acupuncture, telemedicine, or walk-in clinics.
Depending on your medical insurance offerings, these options may not be covered. Offering a health reimbursement account, like the three tax-advantaged options below, could help your employees manage their out-of-pocket health expenses.
Healthcare Flexible Spending Accounts (HCFSAs)
An HCFSA allows employees to save for eligible healthcare costs for the current plan year. Employees and the employer may contribute to the account. HCFSAs can be paired with High Deductible Health Plans (HDHP) or PPO plans, and the unused funds with the employer if the employee terminates employment.
Health Savings Accounts (HSAs)
An HSA also allows employees to save for eligible healthcare expenses. However, unlike an HCFSA, an HSA is individually-owned, so it stays with employees even if they leave employment. Employees can also save for expenses as HSAs have no “use or lose” rule. Unused funds can be rolled over from year to year. HSAs must be paired with a qualified HDHP, and can be funded by both employees and the employer.
While not all non-traditional treatment options are covered by HCFSAs or HSAs, employees may be surprised to learn acupuncture and some alternative healers are considered eligible expenses as long as certain criteria is met. If an employee is trying to avoid visiting a doctor, multiple self-care options are considered eligible as well, such as band-aids, blood pressure monitoring devices, and flu shots.
Health Reimbursement Arrangement (HRA)
The key difference between an HRA and the previous reimbursement accounts mentioned is that HRAs are 100% employer-funded. This gives you a lot of plan design options and control over the total cost of the HRA.
Since HRAs are not required to be pre-funded, employers can decide to pre-fund or to pay only when an employee files a claim. Employers can also choose to reimburse any of the medical expenses allowed by the IRS (defined in Code Section 213(d)) or which expenses to exclude from reimbursement. This gives you flexibility in determining what makes the most sense for your employees and your medical plan offerings.
For more information and help choosing a reimbursement account that best fits your business, get started now.
This blog is up to date as of April 2019 and has not been updated for changes in the law, administration or current event.
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