If you’re like most entrepreneurs and HR leaders, you’ve been thinking about how you can continue to offer a competitive benefits package to attract and retain the very best talent. One perk you may not be thinking too much about—but should be, at least for the next five minutes—is Flexible Spending Accounts, more commonly known as “FSAs”.
Here’s the deal: FSAs provide a simple, stable way for employees and employers to save money. And, offering an FSA can be a good recruiting and retention tool.
Take it from Nathalie McGrath, Director of People at Coinbase, a popular Bitcoin marketplace that began offering FSAs to their employees through Zenefits earlier this year:
“At Coinbase, we strive to offer a very competitive variety of benefits. FSAs are another way to really demonstrate to our employees that we value their medical health, we value their financial health, and we want to do what we can to support them in every aspect of their lives.”
Nathalie is among many HR leaders recognizing the value of FSAs and adding this perk to her company’s employee benefits package. But much like digital currency, Nathalie acknowledges that FSAs are something people don’t initially understand.
Fortunately, we can make it pretty simple. Providing an FSA in your employee benefits package is a win-win for you as an employer and for your employees. Here’s why.
Why Employees Love FSAs
If your employees like keeping more of their paychecks, they’ll love having an FSA.
A flexible spending account (FSA) helps your employees save money while paying for qualified medical or dependent care expenses. By using pre-tax payroll deductions to fund their FSAs, employees reduce their taxable incomes and lower their tax burdens.
There are two kinds of FSAs:
- Healthcare FSA – picks up where traditional insurance coverage ends, providing another layer of reimbursement for hundreds of qualified medical expenses
- Dependent Care FSA – helps employees take care of children, a disabled spouse, elderly parents or other dependents while working or attending school full time
Let’s take a look at how FSAs may save a family money:
Meet the Johnsons, a family of five. Ben and Alice both work full-time outside the home. Little Sally is in daycare while her older brother Seth attends school. Alice’s mom moved in after hip surgery and has an attendant a few days a week.
Here are the family financials, with and without an FSA:
With an FSA, the Johnson family saves $218/ month, or $2,620 a year!
Offering your employees an FSA is like giving them a pay raise.
Just like the Johnsons, employees at Katch, a fast-growing advertising technology company, have been enjoying savings through an FSA for several years. Last year, the company switched to Zenefits HRIS to get streamlined HR services—including an FSA. Katch’s VP of Finance and Human Resources, Betsy Niksefat, acknowledged that parents tend to be the first to see an FSA’s value. Betsy, who has two children, is a big fan of FSAs and says employees typically are too once they hear her pitch:
“Would you like to basically get a 30% discount on your medical expenses? Then take this card to the doctor; it’s loaded with money.”
It’s no wonder employees love FSAs. But, are they a good idea for business? Short answer: Yes. Let’s explore.
Why Employers Love FSAs
As an employer, providing an FSA could help you save money on taxes.
Employers aren’t required to pay the employer portion of the Social Security tax—which amounts to 7.65% of each employee’s taxable income—on employee contributions to FSAs. This reduces payroll taxes by 7.65% of the total employee contributions to the FSA.
You can also save time administering your FSA program with Zenefits.
There’s a lot going on behind the scenes with an FSA. Employers are required to file Form 5500 with the U.S. Department of Labor each year and complete a series of nondiscrimination tests outlined by the IRS. There are also considerable legal requirements to an FSA—from implementation to administration. Since the IRS imposes serious penalties for noncompliance, many companies outsource FSA administration. With Zenefits, you can put this whole paragraph behind you.
Here’s how it works: Employees get a Flex Benefits Card to use as they would any debit card. Setup is simple, and both you and your employees can easily check balances within the Zenefits online dashboard. Coinbase’s Nathalie McGrath and Katch’s Betsy Niksefat both speak to the ease-of-use: “From the admin perspective, it’s been very easy,” says Nathalie. “I signed up, the FSA card showed up on our Zenefits dashboard, and the employee debit cards arrived in the mail.” Betsy agrees, adding that the employee experience is preferable to their previous FSA provider: “The onboarding election process is more smooth, and it’s easy to submit claims and use the card.”
Feel like you’ve got better things to do than worry about manually managing your FSA program? See how Zenefits can help.
Already a Zenefits HRIS customer and want to add FSAs to your employee benefits? Simply log in and request to add this simple feature today.
The post A PSA on FSAs: Why Businesses Are Adding This Perk To Their Employee Benefits appeared first on Zenefits Blog.