What Employers Must Know About Tax-Advantaged Benefits in 2021 and Beyond

by Jim Taylor | Apr 14, 2021 | Employee Benefits

Amongst all the things that 2020 brought to the foreground of our attention, the importance of having a benefits plan that puts employees first is more important than ever. In a recent study, research showed that COVID-19 has had a major impact on how important the majority of employees view their benefits plan. In fact, more than 77% of employees claim that their benefits plan is an important part of their overall compensation, with approximately 73% claiming that benefits play a major role in their decision to stay with their current employer. And with 75% of employees claiming that being provided benefits from their employer is more important than ever, the effects that COVID-19 has had on the way employees view benefits are clear.

Employee benefits are now viewed in ways unlike ever before. For example, benefits that in the past have seemed more like rewards than necessities (i.e. remote work) are now seen as essential by employees. While healthcare benefits are clearly a top priority, the list doesn’t stop there – including those benefits that don’t always get the most attention.

In today’s article we’ll explore several tax-advantaged benefits programs that must be on the radar for modern employers in 2021 and beyond.

Tax-Advantaged Benefits

1. HSAs

Did you know that more than 28 million Americans had a health savings account last year? Health savings accounts or HSAs are accounts that are designed to help employees with higher deductible health plans better save for their medical expenses, and the number of employees that have HSAs has been steadily growing for years. In fact, 95% of employers now provide HSAs to their employees. Because they give employees the opportunity to set aside pre-tax dollars to better manage healthcare costs that are unexpected, HSAs have become increasingly more popular.

2. FSAs

Additionally, flexible spending accounts or FSAs have also become more popular in the last decade, with a reported 32 million Americans currently having an FSA. FSAs, like HSAs, give employees the opportunity to set aside pre-tax dollars for unexpected healthcare costs. The difference being that FSAs allow employees to access the entire amount that they decide to set aside from the first day of their plan year.

3.HRAs

Another increasingly popular tax-advantaged benefit is health reimbursement arrangements or HRAs, with approximately 14 million Americans having an HRA. HRAs are self-insured arrangements that help to minimize premiums and allow employees to have more control of their healthcare expenses. They are also completely funded by the employers and reimbursements are not taxable.

Pros of Tax-Advantaged Benefits

1. HSAs Remain After a Lost Job

As we endured the worst of the COVID-19 pandemic, HSAs certainly helped many American employees. While many people were laid off due to closures and downsizing, many Americans lost their jobs. However, because they did not lose their HSAs, they were able to use their existing funds on qualified medical expenses.

2. Feminine Care Products are Included

The CARES Act allowed for HSAs and FSAs to include feminine care products for the first time ever. This allowed women to spend tax-free dollars on all feminine products (i.e. tampons, pads, liners, cups).

3. FSAs Continue to Update

Last year was full of all kinds of unforeseen changes and with it, FSAs continued to update. For example, employees with FSAs were able to open or close accounts and change their contributions last year, without the stipulation of having a life-changing event. Additionally, for the purposes of maintaining their FSAs, furloughed employees were able to be considered full-time employees.

4. Over-the-Counter Meds

Another major pro of HSAs and FSAs is the eligible expenses with over-the-counter medicines. Thanks to the CARES Act, individuals no longer have to have a prescription for over-the-counter meds in order to use FSA or HSA money.

5. New HRAs

HRAs helped employers maintain their benefits throughout the worst of COVID-19. In 2020, the US Government gave employers an opportunity to offer employees a new type of HRA called an ICHRA or individual coverage health reimbursement arrangement.

Cons of Tax-Advantaged Benefits

1. Ensuring PPE is Considered a Qualified Medical Expense

While medical professionals have recommended the use of PPE and sanitizers in order to slow the spread of COVID-19, it remains unclear if they fall under qualified medical expenses under current provisions of the tax law.

2. Dependent Care Needs to Be Improved

Dependent care FSAs allow individuals to set aside pre-tax dollars to balance work-related dependent care costs (i.e. preschool, before and after school programs, etc.). Unfortunately, their effectiveness is diminished due to the fact that limits have not been updated in over 20 years. Because they have never adjusted for inflation, their amounts do not meet the dependent care needs in most areas of the country. Throughout the COVID-19 pandemic, several parents had to leave their jobs or significantly reduce their hours due to a lack of childcare, though, many essential workers didn’t have that option and were left scrambling for childcare.

3. COBRA is lacking

With unemployment still rampant across the country, several Americans are left wondering how they will manage to pay for their medical expenses this year. Most of those who were furloughed or lost their job in 2020 were placed in the Consolidated Omnibus Budget Reconciliation Act or COBRA. Not only is COBRA expensive, but it is also confusing for both employees and their employers. COBRA is simply not working for several Americans and is a high-priority health care concern in an economy ravished by COVID-19.

How to Adapt Employee Benefits for A Remote Workforce

by Jim Taylor | Feb 15, 2021 | Employee Benefits

The events of the past year have altered many aspects of daily life, with none more jarring than the switch from in-person to remote work. As organizations of every size and industry have pivoted to accommodate this “new normal”, they and their workforce have come to intimately understand the benefits and drawbacks of a remote working environment. Whether your organization chooses to adopt this practice in perpetuity, or offer remote work as an option to your employees after it’s safe to return to the office, your organization should consider altering its benefits package to meet the health-related changes presented by a remote work setting.

With a new environment come new challenges, and your employee benefits should both reflect and seek to address those new challenges in order to retain your current talent, entice new talent, and save on healthcare costs at both the individual and organizational level.

In this post, we’ll cover:

• New difficulties to employee health presented by a remote work setting
• Benefit adjustments that address these difficulties
• How to meaningfully implement these changes

New Environment, New Challenges

While there are many advantages to working from home, there are also several critical obstacles that can negatively impact employees. The most immediate threat is, namely, stress. Workers are currently inundated with uncertainty, from concerns about their own health and the health of loved ones to unexpected financial strain. Employees may also be feeling alienated from their coworkers, friends, and family, causing a decrease in both happiness and productivity in multiple areas of their lives. According to recent research emanating from the CDC, Americans reporting feelings of anxiety, depression, and loneliness in 2020 have tripled in comparison to the previous year.

While some of these feelings may eventually be alleviated by the widespread adoption of a vaccine for the virus that causes Covid-19, remote work environments still present many obstacles that can lead to increased emotional and mental strain. A lack of social interaction with coworkers and misunderstandings stemming from inadequate or poor communication are just some of the hindrances that can increase feelings of anxiety, estrangement, and hurt job performance.

There are numerous studies outlining the direct, negative impact that emotional and mental stress can have on one’s physical health, including heart disease, high blood pressure, and abnormal cholesterol levels. Better mental health advocacy and the increasing amount of evidence that directly links mental and physical health are leading many organizations to offer additional or better benefits that seek to address mental and emotional health in order to drive down healthcare costs now and in the future.

Adjusting Benefits to Meet New Needs

Remote work environments, while convenient, can be mentally and emotionally isolating. These feelings of isolation can often progress into chronic health conditions that can be expensive to both the employee and the employer provided health plan. Mental and physical health are inextricably linked, and the effects of the pandemic have only accelerated the acceptance of this fact and the adoption of programs to address it. As more and more organizations are making the partial or full switch to an entirely remote workforce, employers are simultaneously beefing up their benefits that address the mind-body connection.

One of the simplest, most cost-effective ways to redesign your benefits to include mental and emotional health resources is to adopt a single solution that combines mental wellbeing and chronic condition management through preventative wellness. According to recent research, employee wellness programs provide a 6:1 return on investment in healthcare cost savings.

Chronic diseases often emerge through poor preventative care, costing employers millions of dollars every year. By refocusing your benefits to be employee-centric and encouraging your employees to adopt healthier mental and physical lifestyle habits, employers can achieve monumental cost savings now and in the future. Some examples of wellness programs are those that incentivize employees to keep track their own health data through general physical assessments and friendly competitions. Stimulate your employees to discover and improve their body mass index by offering them a financial reward or paid time off if they complete an annual physical each year. Additionally, creating some friendly competition between employees to engage in healthy habits in exchange for a prize is another great way to engender adoption of good lifestyle choices. By incentivizing employees to participate in preventative care, they may discover they are at risk for certain chronic conditions early enough to redirect the path they’re on.

Support the Transition to Yield Best Results

Open and honest communication is always important in the workplace, but it is especially critical in a remote environment. Most employees are currently working remotely, and there is an increasing likelihood that many companies will decide to go fully remote for the foreseeable future.

One of the most important things that your HR team and organizational leaders can do during the adoption of new benefits programs in any setting is to maintain transparency and open lines of communication between themselves and their employees. Providing employees with the freedom and safety to discuss the obstacles they may be struggling against can help employers to understand the needs of their employees and the resources they may need to be connected to, such as mental health counseling or a one-on-one meeting with your company’s benefits specialist. In addition, open and authentic lines of communication between employees and leaders helps to engender a deeper level of trust. Getting on your employees’ level and being receptive to their needs will increase the likelihood that employees will take advantage of new wellness programs that your organization will offer.

Key Takeaways

Remote working environments present unique challenges, but these challenges also offer new opportunities to encourage employee self-care that can save everyone time, effort, and money. Employees that understand and use the resources available to them are more likely to be productive, long-term members of your team-and will act as great ambassadors to new prospective talent. By offering employee-centric benefits that address both the mind and the body, employers can ensure the wellbeing of their employees. Remember:

• Employers should acknowledge the new challenges to employees presented by remote work environments and adjust their benefits packages accordingly to meet these challenges.
• Employer benefits packages should include wellness programs that offer incentivized programs and resources for those struggling with mental and emotional health issues, as these issues often manifest as chronic physical conditions. Studies have shown that preventative care programs save employers millions of dollars healthcare costs.
• Facilitate and encourage the regular use of the wellness program and other new employee resources through open and honest communication between leaders and employees.