HSA, FSA, HRA - what’s the difference?
Deciding which benefits to sign up for at work can be confusing. Insurance itself can be complicated enough, and if you have the option of a health care reimbursement account, you might be completely lost! Here is a guide to help you decide which account is right for you, depending on which options your employer provides:
|
HSA / FSA / HRA |
Health Savings Account (HSA) | Flexible Spending Account (FSA) |
Health Reimbursement Arrangement (HRA) |
|---|---|---|---|
| Description | An HSA is a tax-advantaged savings account that is used in combination with a high deductible health plan (HDHP). Accountholders can use the HSA funds to cover eligible medical expenses. | An employer-established, tax-advantaged account funded by the employee and/or the employer to pay for eligible medical expenses with pre-tax dollars. | An HRA is an employer-funded plan that may be used to reimburse employees for eligible medical expenses. |
| Annual Maximum |
The 2018 annual contribution limits are: The 2019 annual contribution limits are: |
The 2018 annual contribution limit for a Health Care FSA is $2,650. The 2019 limit will be announced soon. |
The IRS does not impose HRA limits. Limits are set by the employer. |
| When is the amount available? | As funds are contributed. | Start of Plan Year. | Depends on your specific plan design. |
| Can you take the account with you if you leave your employer? | Yes - you own the account. | No - but you could continue using your FSA with COBRA, usually until the end of the year. | No - but you could continue using your HRA with COBRA. |
| Do you need to have a certain health plan? | Yes - to have an HSA you must be enrolled in a qualifying High Deductible Health Plan (HDHP), and cannot be covered by any other non-qualifying health plan (such as being eligible for Medicare, having a Health Care FSA, or being considered as a dependent on someone else's tax return). | No. | Beginning in 2014, employees must be enrolled in employer-sponsored group coverage unless the HRA is limited to vision or dental expenses.* |
| Do funds carry over from year to year? | Yes. | This is up to the employer. They are limited to carryover of up to $500 to the next Plan Year, OR allow a Grace Period. | This is up to the employer. |
| What can you buy with the account? | Medical expenses under §213(d) of the Internal Revenue Code (IRC) (over-the-counter drugs are not an eligible medical expense unless prescribed by a health care provider). HSAs may not be used to pay insurance premiums except for (1) COBRA, (2) qualified long-term care insurance (3) health care coverage while the individual is receiving unemployment compensation; and (4) premiums for Medicare Part A or B, Medicare HMO, and (5) after age 65, the employee’s share of employer-sponsored retiree health care. Click here for more information. | Any otherwise unreimbursed medical expenses that are defined under §213(d) of IRC (over-the-counter drugs are not an eligible medical expense unless prescribed by a health care provider). Health insurance premiums and long-term care services are not reimbursable. Click here for more information. | Employers decide whether to reimburse all or a subset of any otherwise unreimbursed expenses that are qualified under §213(d) of IRC (over-the-counter drugs are not an eligible medical expense unless prescribed by a health care provider). This can include health insurance premiums (other than premiums that are paid through an employer’s consumer directed health care plan) and long-term care insurance premiums. However, long-term care services are not reimbursable. Click here for more information. |
| Can you earn interest? | Yes - interest can be accrued on a tax-deferred basis in qualified HSAs. And if the account balance reaches the minimum balance requirement, the funds can be invested in mutual funds and those gains are also tax free. | No. | No. |
| How do you save money - what are the tax benefits? | Contributions are tax free, interest and investment gains are tax free, and withdrawals are tax free when used for eligible medical expenses. | Payroll deposits and claim payments are tax free. | Free money to use for eligible medical expenses. |
*PHS Act sec 2711, per DOL FAQ re: PPACA Part XI Q1, Q3 http://www.dol.gov/ebsa/faqs/faq-aca11.html HRA Enrollees must be enrolled in group health plan.
Compare your options carefully in order to decide what will be best for you and your family. Consulting a personal financial and/or tax advisor may give you a better idea of what plan will be best for your particular situation.
If you have any questions, please contact us by calling 866-818-8805, or by filling out an online contact form.