Tax-Advantaged Accounts Overview

You may have the option to contribute to a Health Savings Account (HSA). You’ll see the specific benefits for which you’re eligible when you access the Mercer Marketplace 365+ website.

You can save money on your health care and dependent care expenses by enrolling in a Health Savings Account (HSA) and/or Flexible Spending Account (FSA).

Chenega offers the following accounts:

Health Savings Account (HSA)
Health Care Flexible Spending Account (FSA)

Available to employees who are not eligible or choose not to elect an HSA

Dependent Care Flexible Spending Account (FSA)

Available to all employees

How much could you save?

Here's an example. Let's say Jennifer decides to set aside $2,000 in an HSA or FSA for the year. Normally, on that money, she'd pay $560 in federal income tax, $100 in state income tax, and $153 in FICA tax. So, by contributing that $2,000 to her HSA or FSA, she'll get $813 in tax savings for the year.

WITHOUT AN HSA OR FSA, JENNIFER WOULD PAY … SAVINGS
28% in federal income tax $560
5% in state income tax $100
7.65% in Federal Insurance Contributions Act (FICA) tax $153
Her total tax savings for the year with an HSA or FSA $813

This hypothetical illustration is for educational purposes only. Dollar amounts or savings will vary depending on income, state and city tax rules, and other factors. Please consult a tax, legal, or financial advisor about your own personal situation.

What's eligible?

Play games to learn which expenses can be paid for with a tax-advantaged account.

HSA: What's Eligible, What's Not?

FSA: What's Eligible, What's Not?

An alternative spending account may also be available to you.

You may also be eligible for a Health Reimbursement Account (HRA). HRAs are employer funded and can be used to pay for eligible medical and prescription out-of-pocket expenses for you and covered family members. If you are eligible for both an HRA and an HSA, you may pick one.

What are the differences between an HSA, FSA, and HRA?

HSA FSA HRA
Financial benefit: Pre-tax saving, money grows tax-free Pre-tax savings Employer funded
Use account money for: All eligible healthcare expenses All eligible healthcare expenses All eligible healthcare expenses
“Use it or lose it” at year-end? No Yes No
Maximum contribution: $3,600 (individual)/$7,200 (family) Up to IRS limits Employer funded, no contributions required
Can I change my contribution during the year? Yes, at any time Only if you have a qualifying life event No, this is employer funded
Can I take it with me if I leave Chenega? Yes No No
 

Health Savings Account (HSA)

You may have the option to contribute to a Health Savings Account (HSA). An HSA lets you save pre-tax dollars to pay for eligible health care expenses now or later — even in retirement. You’ll see the specific benefits for which you’re eligible when you access the Mercer Marketplace 365+ website.

Eligibile employees may open and contribute pre-tax money to an HSA through Discovery Benefits. The HSA is a tax-free savings account you can use to help cover eligible health care costs.

HSA features:

You contribute pre-tax dollars. You can contribute to your HSA through automatic, pre-tax payroll deductions. Change your contribution amount at any time during the year. In 2020, the limits on total contributions to your account are:

  • Up to $3,600 for employee-only coverage
  • Up to $7,200 for family coverage
  • If you’re age 55 or older, you may contribute an additional $1,000

Works like a bank account. Pay for eligible medical, dental and vision expenses for you and your family by swiping your HSA debit card or reimburse yourself for payments you’ve made (up to the available balance in the account). Spend the money on:

Never pay taxes. Contributions are made from your paycheck on a pretax basis, and the money will never be taxed when used for eligible expenses.*

It’s your money. Unused money can be carried over each year and invested for the future — you can even take it with you if you leave your job. This means you can build up money in your HSA to create a tax-free nest egg for your medical expenses in the future, even in retirement.

How the plans work together with the HSA:

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*Money in an HSA can be withdrawn tax-free as long as it is used to pay for eligible health-related expenses. If money is used for ineligible expenses, you will pay ordinary income tax on the amount withdrawn, plus a 20% penalty tax if you withdraw the money before age 65

HSA eligibility requirements

To open an HSA, you:

  • Must be enrolled in a qualified consumer driven health plan.
  • Cannot simultaneously participate in a traditional health care FSA.
  • Cannot be covered by health insurance other than a high-deductible health plan.
  • Cannot be enrolled in Medicare or Medicaid.
  • Cannot be enrolled in TRICARE.
  • Cannot be enrolled in Indian Health Services.
  • Cannot be claimed as a dependent on someone else’s tax return.

Not Everyone Can Open an HSA

All employees are eligible to enroll in the HDHP. However, you aren’t eligible to open an HSA if you are:

  • Enrolled in Medicare Part A or Part B
  • Enrolled in another medical plan, unless it’s a qualified high deductible health plan
  • Eligible to be claimed as a dependent on another individual’s tax return
  • Married with your spouse enrolled in a health FSA through his/her employer
  • Not a U.S. resident
  • A veteran and have received veterans’ benefits within the last three months
  • Active military.

* While the Patient Protection and Affordable Care Act allows parents to add their adult children (up to age 26) to their health plans, the IRS has not changed its definition of an eligible dependent (i.e., under age of 19 or under age of 24 if full-time student) as it pertains to Health Savings Accounts. For example, an employee who covers a 25-year-old child under the health plan is not eligible to use HSA funds to pay the dependent child’s medical expenses. Please consult your tax advisor to see if your dependent meets the definition of an eligible dependent.

 

Flexible Spending Accounts (FSAs)

You may have the option to contribute to a Health Care Flexible Spending Account (FSA). All employees have the option to contribute to a Dependent Care FSA. FSAs let you save pre-tax dollars to pay for eligible health care or dependent care expenses during the year. You’ll see the specific benefits for which you’re eligible when you access the Mercer Marketplace 365+ website.

Save money on health care and/or dependent care expenses by using a tax-advantaged FSA. The money you contribute to these accounts comes from your paycheck before it is taxed, and you withdraw it tax-free when you pay for eligible expenses.

Health Care FSA

Available to employees who are not eligible for an HSA

  • Contribute up to the IRS limit annually to help cover eligible medical, vision and dental expenses. For a complete list of eligible expenses, refer to IRS Publication 502.
  • Use a debit card to pay for your eligible expenses.
  • Choose your contribution amount once a year (if your personal situation changes (for example, getting married or having a baby), you may be able to change your election during the year).
  • Your entire annual contribution is available to you from the beginning of the plan year.
  • Unused money does not carry over at the end of each year — use it or lose it.

Dependent Care FSA

Available to all employees

  • Contribute up to the IRS limit to help cover your eligible dependent care expenses, such as child day care or elder care. For a complete list of eligible expenses, refer to IRS Publication 503.
  • Get reimbursed by submitting a claim.
  • Eligible expenses include child care for children up to age 13 and care for dependent elders.
  • Unused money does not carry over at the end of each year — use it or lose it.
Learn more

For more information about the HSA and FSAs, visit the Mercer Marketplace 365+ website.

Questions

If you have questions, call a Mercer Marketplace 365+ benefit counselor at 888-281-3534.