Medical expense reimbursements
Many businesses grant medical insurance to their employees. Health insurance can be bestowed in the form of: Health Savings Accounts (HSA), Health Reimbursement Accounts (HRS), Flexible Spending Accounts (FSA), or simply a taxable stipend for health insurance. The tax benefits of each account or stipend vary, but each reimburse employees for health premiums and other qualified medical expenses.
Specifically, HSAs are employee-owned bank accounts that allow for tax-free medical expense reimbursement. Companies contribute an amount to employees’ HSAs at the beginning of the year or throughout the year. In addition, employees can contribute to their HSA account, tax-free. When a health issue or expense arises, employees can disburse HSA money to pay for health expenses. If employees do not use their account throughout the year, the balance carries over to cover medical costs in the following year.
HRAs also reimburse employee medical expenses tax-free with rollovers. However, they are paired with a high-deductible health plan or as a stand-alone benefit. FSAs are similar, but only permit employees to save for qualified medical expenses during a single year. Lastly, a few businesses offer a taxable allowance for health insurance of their employees’ choice.