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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
Comparison Chart

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:
Individuals - $3,450
Family - $6,900

The 2019 annual contribution limits are:
Individuals - $3,500
Family - $7,000

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.

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