Lowering the Obstacles to Successful FSA Usage

Flexible spending accounts (FSAs) are the oldest tax-advantaged healthcare spending account currently available and by far the most common. Yet many workers still don’t feel they really understand them.

That’s borne out by the relatively low adoption rate at many companies, despite tax savings as high as 40% on the funds set aside. Plus, despite the Carryover option, a significant number of account holders still experience a loss of at least some unspent funds at the end of the plan year – traditionally the biggest objection to taking out an FSA account.

In this article, we’ll review the current status of FSA accounts. We’ll also talk about lowering the obstacles to successful FSA usage.

Where FSAs Stand

  • An estimated 32.6 million FSAs are in force in 2022, up from 31.7 million in 2021, according to market forecasts by the Aite-Novarica Group.
  • The U.S. Bureau of Labor Statistics reports that 43 percent of employees in private businesses and 71 percent of state and local government employees had access to a healthcare FSA through their employers in 2021.
  • More than 40% of FSA account holders forfeited some portion of their FSA contribution in recent years, according to data collected by the Employee Benefit Research Institute (EBRI). EBRI puts the average annual loss per account at between $339 and $408. 

Ways to Increase FSA Adoption and Usage

Two of the most effective ways to raise FSA adoption, increase usage, and lessen the chance of forfeiture are (1) year-round employee education and engagement and (2) implementing ease-of-use features, including debit cards and mobile apps.

Education and Engagement

PlanSponsor reported in 2021 that two-thirds of employees want year-round help understanding and using their benefits. That number goes up to 78% among Millennials. What kinds of information are they seeking?

  • Details on how FSAs work
  • Explanations of how to achieve tax savings
  • Lists of eligible products and services
  • Clear information on carryover (or grace period) and run-out period
  • How-to tips on the best way to determine the amount to set aside

Equally as important, they want to receive this information not only during enrollment but also via focused educational communications, engagement activities, and “check your account” reminders provided throughout the plan year.

Ease-of-Use Features

It only makes sense that when FSAs are easier to use, higher usage results. The two most popular convenience features of FSAs are debit cards and mobile apps.

With debit cards, employee-participants have immediate access to funds and can avoid the financial burden and effort of paying in advance, submitting claim forms, and waiting for reimbursement. They can also track their card usage online to see how they spend their funds. Finally, of course, debit cards can be used to pay eligible expenses both in-person and online.

Mobile apps make it possible to check account balances and review card transactions on your phone. In cases where they aren’t able to use a debit card, participants can file claims over their phone or online and upload photos of receipts.

Help Your Employees Benefit from FSAs

Employees who understand FSAs better are more likely to enroll in them and use them effectively. Benefits are only as good as how satisfied your employees are with them. By lowering obstacles to FSA usage, employee satisfaction should increase.

DataPath Summit is a cloud-based solution for the administration of CDH accounts, including FSAs, HRAs, HSAs, and COBRA billing.

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