Spending Accounts

Spending Account Options

• Health care flexible spending accounts (FSAs)
• Health reimbursement arrangements (HRAs)
• Health savings accounts (HSAs)
• Health Incentive Accounts (HIAs) with debit card
• Qualified transportation accounts (QTAs)
• Dependent care reimbursement accounts (DCAs)

Offering spending accounts to your employees can be an effective way to help contain health costs for both your business and your employees. These accounts have annual maximums that are subject to change by the IRS. Learn about the many options available to groups of all sizes.

Health care flexible spending accounts

Employees can use their tax-free savings to pay for qualified out-of-pocket health care expenses such as pharmacy and office visit copayments. As the employer, you don’t pay payroll taxes on the savings your employees accumulate.

Your employees can use their health care FSA to pay for up to $3,050 in qualified health care expenses. This includes medical, dental, and vision expenses, plus prescription drugs that are not covered by their insurance plan. This includes copayments and deductibles. FSA contributions are automatically debited from employees’ paychecks.

Limited purpose health care flexible spending accounts: Similar to a health care FSA, a limited purpose health care FSA reimburses only dental, vision, and preventive care. Participation in this type of FSA allows employees to participate in a qualified health savings account.

Health reimbursement arrangements

HRAs are employee spending accounts that employers fund. Your employees can use their HRAs to help pay for health care deductibles and other out-of-pocket expenses.

Funds that the employer contributes to the HRA are not considered wages and are not subject to income taxes, FICA (Social Security and Medicare), or workers’ compensation.

Health savings accounts

Employees can use an HSA to pay for qualified health care expenses and save for future expenses. Employees own their HSAs.

Employers can contribute to their employees’ HSAs and allow for employees’ payroll contributions. Employees can also make contributions outside of payroll contributions, which are tax-free. Interest earned and dollars spent on qualified health care expenses are tax-free as well. Employees can also invest their dollars once they reach a certain level of savings.

Participation in an HSA must always be linked to a qualified high-deductible health plan (QHDHP), as mandated by the federal government.

Health incentive accounts

A health incentive account is a reimbursement account tied to a medical plan that encourages healthy activities and consumer engagement. The HIA gives employees the opportunity to earn reward dollars they can apply to eligible out-of-pocket expenses, such as their deductible, coinsurance, and copayments. Funds are placed on a UPMC Consumer Advantage debit card to pay for eligible medical and pharmacy expenses.

Qualified transportation accounts

A QTA allows employees to make pretax contributions to pay for qualified transit and parking expenses related to their commute to work. Employers that offer a QTA option can also allow funds to roll over from year to year.

Dependent care reimbursement accounts

Your employees can set aside up to $5,000 annually to offset costs associated with the care of eligible children or elderly dependents—such as daycare or babysitter expenses, before- and after-school programs for children under 13, and adult daycare centers. (Employees may set aside up to $2,500 if they are married and file separate federal income tax returns.)