To help employees take full advantage of the benefits that are available to them and get more mileage from their health care dollars, here are four things to communicate during open enrollment this year.

1. The value of FSAs and HSAs, and how they work. FSAs and HSAs are health care spending accounts that allow employees to set aside pre-tax contributions to pay for everyday and unexpected health expenses. Help employees understand the key differences between these accounts, including: HSAs are opened and owned by the individual but require enrollment in a qualified high-deductible health plan to contribute, while FSAs are an employer-sponsored account that is owned and managed by the employer. Funds in an HSA rollover from year to year and always belong to the employee (even into retirement), while FSA funds expire each year (often on Dec. 31). An employer may allow employees to rollover up to $570 in 2022 from their FSA into the following plan year or extend the plan year by two and half months, but neither option is required.

2. How FSA/HSA funds can be used. Understanding the broad array of eligible expenses is the first step to getting the most out of an FSA or HSA and saving money on health care expenses. There are currently thousands of products and services eligible for FSA and HSA reimbursement, and there are ongoing industry efforts to expand the eligibility rules to make these accounts even more valuable for consumers. For example, legislation in recent years extended eligibility to menstrual care products for the first time and made over-the-counter medications eligible without a prescription. Giving employees access to a comprehensive eligibility list will help them understand and make informed decisions about how much they want to contribute to their accounts, based on how they can spend funds.

3. Tax impact and savings potential. Both FSA and HSA contributions are made with pre-tax income, which means account holders can reduce their taxable income by the amount of their contribution. While the IRS hasn't yet announced the 2023 FSA limit (this typically is announced in October or November), limits are expected to increase from the current 2022 limit of $2,850. HSA contribution limits, on the other hand, have been announced for 2023 and have increased to $3,850 for individual enrollment in a qualified HDHP and $7,750 for families. Through contributing tax-free FSA and HSA funds toward health care needs, individuals can save an estimated 30% (based on individual federal and state tax brackets). This is more important than ever as persistent inflation is driving up costs for nearly all goods and services.

Health care costs are rising and expected to exceed inflation levels. You can help employees understand the savings potential of FSAs and HSAs by providing easy access to FSA and HSA calculators that help them anticipate future expenses based on their personal and family health needs, estimate how much they should contribute to their account, and project potential tax savings. That means more money in their pockets, which is something everyone needs these days.

4. How to avoid FSA forfeitures. As health needs changed and access to care was disrupted during the COVID-19 pandemic, federal legislation was passed that gave employers the flexibility to extend deadlines and rollover limits. What most consumers, and even many benefits professionals, don't understand is that these changes were optional and deadlines return to normal at the end of 2022. With that in mind, here's what you should communicate to employees to help them use, not lose, FSA funds:
   • Your organization's normal FSA spending deadline. Temporary deadline extensions expire this year, which means that for many FSAs, the spending deadline is Dec. 31.
   • If you offer an FSA grace period. Year-long grace period deadline extensions also end this year, which means that March 15, 2023 will be the last chance for anyone with a December 31 spending deadline to spend remaining FSA funds.
   • The amount of your FSA carryover, if offered. Employers were allowed to temporarily increase the FSA carryover for the past two years. For 2022, carryover limits are back in place, which means that at a maximum, employees may have a carryover allowing up to $570 to roll into next year and anything over that amount will be lost.
   • Where and how to find their FSA balance. The optional FSA deadline extensions and rollover increase coupled with the disruption to health care access has left many account holders with more FSA funds remaining in their accounts than normal. Current estimates indicate that FSA holders forfeit over $1 billion dollars in unused funds to a missed deadline. Don't let your employees be part of this statistic. Show them when and how to track their balance. Employees can also consider signing up for FSA deadline alerts through FSAstore.com.

Read more: HSAs can help those with disabilities save on expenses