Higher FSA and HSA Limits in 2008
Flexible Spending Accounts (FSAs) are a great way for your employees to make pre-tax deductions to a reimbursement account that can be used to pay eligible health care or dependent care expenses, and they are available to all worksite employees at no cost to you or to them.
There are two types of FSA accounts – Health Care Reimbursement Accounts (HCRAs) and Dependent Care Reimbursement Accounts (DCRAs). The 2007 maximum allowed for the HCRA was $3,000, and the maximum allowed for the DCRA was $5,000. In response to rising health care costs and requests from our clients, Oasis has increased the health care maximum applicable to the FSA to $4,000 for 2008.
If you are currently offering a High Deductible Health Plan (HDHP) and Health Savings Accounts (HSAs) to your employees, the deal has recently become sweeter. For 2008, the maximum annual HSA contribution for an eligible individual with single coverage is $2,900, up from $2,850 in 2007. The maximum for family coverage is $5,800, up from $5,650 in 2007.
An HSA is a tax-exempt account established to pay for qualified medical expenses of the account holder and his or her tax dependents. Unlike Flexible Spending Accounts (FSAs), HSA balances carry over from year to year.
To be eligible to contribute to an HSA, an employee must be covered by an HDHP. The employee cannot be covered by a non-HDHP health plan (including a medical FSA), enrolled in Medicare, and cannot be claimed as a dependent on someone else’s income tax return.
