Attracting and retaining top talent is more challenging than ever. These days, prospective and existing employees expect more from employers. Since job seekers have the upper hand in today’s competitive labor market, your organization needs to have an employee-centric mindset and top-tier benefits.

What does that mean for your business? From an economic standpoint, it means your benefits offerings should be designed to delight. Satisfied employees are more productive and more likely to stay put, so there’s less employee churn.

Onboarding, resignations, and training cost an average of one-half to two times an employee’s annual salary. Staff turnover costs employers a significant amount of money. From a recruiting perspective, offering a top-tier benefits package—one with an employee-centric philosophy and focus—makes you a top choice for the best and brightest candidates.

Level up your benefits with spending accounts

Along with healthcare benefits, tax-advantaged spending and savings accounts and post-tax lifestyle accounts are key components of a top-tier benefits package. The pre-tax financial accounts can help your employees save on costs related to current healthcare, childcare, commuting, and other expenses and on taxes. And, they offer a tax advantage to employers as well.

Lifestyle post-tax accounts provide a new way for employers to provide additional income that can be earmarked for employer defined activities and products not approved by the IRS for pre-tax accounts.

Spending account options:

  • Health savings accounts (HSAs)
  • Healthcare flexible spending accounts (FSA)
  • Dependent care FSA
  • Commuter accounts
  • Healthcare reimbursement arrangements (HRAs)
  • Lifestyle spending accounts

How to select the right benefits for your workforce

Knowing how critical health and wellness benefits are for your workforce, as you explore your benefit options, consider what you’ve heard from your teams, the trends and strategies for retention from your competitive peers, and what you’re looking for in a benefits and financial partner.

Below we’ve pulled together some highlights of each account type’s benefits to help you compare, contrast and select which options can best serve your employees.

Benefits of an HSA

To maximize the power of an HSA, and individual would need to be enrolled in a high deductible health plan (HDHP). These accounts are versatile and can be a strategic component of a financial plan that helps individuals cover current and future healthcare costs and helps offset health-related expenses in retirement.

  • This account type acts as both a savings and a spending account with investment potential
  • The triple tax advantage:
    • 1) Funds are not taxed when deposited
    • 2) Interest or investment related earnings are not taxed
    • 3) Funds are not taxed when spent on qualified medical expenses.1
  • When funded through direct payroll deposit, contributions to an HSA further reduces the employee’s taxable income (they should be directed to their tax professional for more clarity on FICA savings)
  • HSA funds are “portable,” meaning any unused balance rolls over year to year and remains with the individual even after the employee leaves your company.
  • No contribution minimums to activate and maintain the HSA, although be sure to review dormancy and no balance policies
  • Once the accountholder reaches the age of 65, she/he can then use the HSA dollars for any purpose without penalty, although income tax must be paid for non-qualified uses.

Benefits of a flexible spending account (FSA)

While HSAs appeal to a broad audience, some employees can benefit from an FSA if they have fixed and predictable medical expenses throughout the year. These accounts further enhance your employee benefit package.

  • Contributions to an FSA are payroll deducted “pre-tax,” reducing the employee’s taxable income
  • This account helps pay for out-of-pocket medical expenses, including deductibles, coinsurance, and over-the-counter purchases from an extensive list of eligible items (such as allergy medicine, COVID-19 tests, first aid materials and more)

Benefits of a dependent care FSA

A dependent care FSA is a unique benefit account that helps parents, guardians or caretakers pay for caregiving costs, while also gaining some tax benefits.

  • Account can help pay for expenses related to childcare centers, babysitter and nannies (birth through age 12); summer day camp; before or after-school care; disabled dependent and/or spousal care; elder care
  • Employees can determine the dollar amounts they want to be direct deposited from their paychecks into the dependent care FSA
  • Contributions to dependent care FSA reduce the employee’s taxable income

Benefits of commuter accounts

If a percentage of your workforce regularly uses mass transit to commute for work, commuter accounts can be a great option to add to your benefit account offerings.

  • Employees can use the account to set aside pre-tax dollars to help pay for commuting costs and reduce taxable income
  • Employees can receive cash reimbursement for parking plans, vanpool, and transit passes
  • Ridesharing charges through eligible service providers — with at least 6 passenger spots – can be reimbursed

Benefits of healthcare reimbursement arrangements (HRAs)

HRAs are an additional healthcare benefit account option you may want to consider based on your associate population and the medical plans you offer. HRAs are employer-contributed funds that reimburse your employees for medical expenses tied to your group health plan or to help them purchase their own insurance.

The six different IRS-approved plan types for HRAs are:

  1. An HRA integrated with a group health plan
  2. A limited purpose HRA: dental, vision and preventive care expenses only
  3. Retirement HRA
  4. Qualified small employer HRA, designed for businesses with fewer than 50 full time employees
  5. Individual coverage HRA
  6. Excepted benefit HRA

Benefits of lifestyle spending accounts

These accounts are employer-funded and help pay for employees’ physical, financial and emotional wellness costs, among other well-being expenses and promote healthy habits and well-being in your workforce.

This is a unique benefit account opportunity that you can fully customize based on your employees’ needs and can be a powerful tool in attracting and retaining top talent for your company.

  • Fully customizable employer offering with post-tax funding
  • Eligible expenses can be selected from a broad list. For example, fitness memberships, financial planning services and meditation classes, among many other options.

As businesses confront the ongoing challenges of workforce retention and strive to build a brand that attracts top talent, business owners are finding creative ways to “level up” their benefits packages. Adding and upgrading benefit accounts to your benefit offerings can be a strategic way to deliver value and savings to your employees.

Learn more about UMB Healthcare Services, which ranks fifth in total accounts and fourth in total deposit assets among all HSA providers (Source: 2021 Devenir Year-end HSA Market Statistics & Trends Report).

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FSAs, HRAs, Lifestyle Spending Accounts, and Commuter Accounts are NOT deposits or obligations of UMB Bank, N.A. and are NOT insured by the FDIC.

1 States can choose to follow the federal tax-treatment guidelines for HSAs or establish their own. Some states tax HSA contributions. If you have questions about your tax implications, consult your tax advisor. HSA funds used to pay for non-qualified medical expenses are subject to income taxes and a possible additional 20% penalty if you are under age 65. The money and any earnings in your account are not taxed if used to pay for eligible healthcare expenses. Investments in securities through an HSA investment account are not FDIC insured, may lose value, and have no bank guarantee.

Investments in securities through HSA investment account are:

Not FDIC Insured • May Lose Value • No Bank Guarantee

Funds in an HSA Deposit Account are held at UMB Bank, n.a., Member FDIC.