An HSA works like an investment account, with an important difference: employees can use it to pay for qualified medical expenses and the money isn't subject to taxes or penalties.*
If an employee enrolls in the CDHP and meets the HSA eligibility requirements, they can open an account. Liberty Mutual makes annual contributions to an employee’s HSA based on their enrolled Health Plan coverage level: $600 for individual coverage and $1,200 for family coverage (prorated based on an employee’s date of hire or benefit coverage date). That’s free money employees can use to pay for their qualified medical expenses now or in the future. Employees can also contribute through before-tax payroll deductions, up to the combined IRS limit.
| The CDHP option comes with a health savings account (HSA) |
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 Liberty Mutual makes a tax-free contribution to the employee’s account.
Employees can make before-tax contributions, too. |
 Employees can use their account to pay for qualified medical expenses now, or in the future.
The balance rolls over from year to year.
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 Employees get important tax advantages:
- Tax-free contributions
- Tax-free interest and investment earnings
- Tax-free withdrawals when paying for qualified medical expenses
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The HSA advantage
Make sure to understand the advantages of the HSA to maximize health care dollars — today and in the future.
- Several tax advantages.
- Tax-free contributions: Most money that goes into the account (including contributions from the employee and Liberty Mutual) isn't taxed as income.
- Tax-free earnings: Interest and investment earnings on the account aren't taxed.
- Tax-free distribution: Money used on qualified medical expenses isn't taxed.
- Account holders are in control. Employees decide how much to contribute and when to spend (or save) their HSA dollars. They can change their contribution at any time during the year. For example, employees can increase contributions to maximize their future savings or if they're incurring more health care costs than expected.
- It has growth potential. Employees can invest any amount over $1,000 (in $100 increments), provided employees maintain a cash balance of at least $1,000.
- Use it...or save it. Unused balances in the HSA roll over from year to year. This means an employee can use the HSA to pay for current out-of-pocket medical expenses, or save the money in their account to pay for future medical expenses, even into retirement.
- It's portable. If an employee leaves Liberty, they can take their HSA funds with them and use them for qualified medical expenses in the future.
The Health Care Flexible Spending Account (FSA) is for EPO Option participants and employees enrolled in health coverage outside of Liberty that isn’t a high deductible health plan. Like an HSA, a Health Care FSA lets employees save for eligible medical expenses straight from their paycheck, before taxes. It’s important to know that there are also key differences between the HSA and Health Care FSA.
If an employee doesn’t use all of the money in their FSA during the year, they lose it (except for a limited amount that can be carried over into the following year, from $50 to $550 for 2021). Otherwise, remaining balances are forfeited. Employees can also only change their contribution amounts during annual benefits enrollment or if they have a qualified change in status during the year. Remember, Liberty doesn’t contribute to the FSA but, unlike with an HSA, the full annual contribution amount will be available to use in January – employees don’t need to wait for it to appear in their account.
For 2021, the Health Care FSA contribution limit is $2,750.
Note: Due to Puerto Rico tax code, employees in Puerto Rico are not eligible to contribute to HSAs, Health Care FSAs or the Dependent Care FSA on a before-tax basis.
Comparing key features. Summarized below are similarities and key differences between the Health Savings Account (HSA) and the Health Care Flexible Spending Account (FSA).
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HSA
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Health Care FSA
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Who qualifies for the account?
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Employees must participate in one of the CDHP options to be eligible.
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EPO participants are eligible.
Employees may also qualify if they’re enrolled in a health plan outside of Liberty that is NOT a high deductible health plan.
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Can employees contribute to the account?
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If an employee is eligible for the account, employees can contribute through before-tax payroll deductions.
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How much can employees contribute each year?
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$3,600/ individual coverage*
$7,200/ family coverage*
$1,000 in catch-up contributions if they’re age 55 or older.
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2021 limit: $2,750
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Can employees change my contribution amount?
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Yes, at any time.
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Yes, but only during annual benefits enrollment or if an employee have a qualified change in status during the year.
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Will Liberty contribute to employee's account?
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Yes. $600/individual coverage $1,200/family coverage
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No
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How can employees use the funds in their account?
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For qualified medical expenses (e.g., medical, prescription drug, dental, vision care), excluding premiums.*
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For qualified medical expenses (e.g., medical, prescription drug, dental, vision care), excluding premiums.
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Do funds carry over from year to year?
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Yes, unlimited amount.
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Yes, a limited amount can be carried into the following year ($50 to $550 for 2021). Otherwise, the remaining balance is forfeited.
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When can employees access their funds?
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As soon as funds are deposited to their account.
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The entire amount they elect to contribute for the year is available as of Jan. 1.
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What happens if an employee leave Liberty?
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They can take the account with them.
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They may lose any amount left in their account.
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HSA:
An employee can change their HSA contribution at any time. Any change affects future contributions and will take effect as soon as administratively practicable following the date they change their contribution amount. Note that any increase in the total contribution amount will be calculated for the paychecks left between the time the employee records the change and their last paycheck of the year.
Health Care FSA:
An employee can only change their Health Care FSA contribution amount during annual benefits enrollment unless they experience certain qualified status changes during the year.