Posted 4 years ago - by

What is the difference between an FSA, HRA, and HSA?

Did you sign up for an FSA, only later to find out it is an HSA?

Or maybe…
It’s actually an HRA?

These three-letter acronyms understandably get mixed up all the time.

We wanted to highlight the differences between the FSA, HSA, and HRA offered by our Benefits Administration department.

Copy it.

Share it.

Post it.

This is your Benefits Administration-Acronym Cheat Sheet. (Not as catchy of a title as your Payroll Cheat Sheet).

FSA – Flexible Spending Account

  • Employees can contribute pre-tax dollars into this account
  • Employers can also contribute non-taxable funds to this account
  • Account “owner” is the employer
    • The employee cannot take this account with them if they leave the company
  • Use or lose account
    • If an employee does not use all the funds during the plan year (or leaves the company), they lose the funds they have contributed (unless they have the rollover option)
  • There are three types of FSA accounts
    • Medical FSA
      • Used for eligible medical, dental, and vision expenses
    • Limited Purpose FSA
      • Used for dental and vision expenses only – usually paired with a Health Savings Account (see below)
    • Dependent Care
      • Used for dependent children’s childcare (age 13 or under) or a dependent’s caregiver

HSA – Health Savings Account

  • Paired with a high-deductible health plan
  • Employees can contribute pre-tax dollars into this account
  • Employers can also contribute non-taxable funds into this plan
  • Account “owner” is the employee
    • The account follows the employee if they leave the company
  • The funds in the account roll-over every year
    • This is not a use or lose plan
  • The account is also a savings/retirement plan
    • It accrues interest
    • Funds can be invested
    • Once the account owner turns 65, they have access to the funds similar to that of a 401K account
  • Cannot be paired with a Medical FSA
    • The IRS does not allow employees to place pre-tax funds into both a Medical FSA and an HSA

HRA – Health Reimbursement Arrangement

  • Paired with a high-deductible health plan
  • Employer’s contribute non-taxable funds into this account
    • Employees do not contribute into an HRA
  • Employer designs the plan
    • The Employer has say on what employees can use the HRA for and when they can use it
  • Account “owner” is the employer
    • Employees cannot use the account once they leave the company
  • Three different types of accounts
    • Integrated HRA
      • Usually linked with a health plan
    • Dental/Vision (Excepted benefit) HRA
      • For dental and vision expenses only
  • Retiree HRA
    • For use by retirees

Related Posts

5 Payroll Software Features That Drive Your Overall Payroll Efficiency

The benefits of a payroll software/service can assist your company in more than just better overall productivity and profitability Whether you are investing in your first payroll software/service...

Read more...

California’s Local Minimum Wage Increases & SF’s PPLO Expansion On Track for July 1

The minimum wage in the state of California has seen a yearly increase in recent years The change varies across cities and counties and is based on the amount of employees a company has For 2020,...

Read more...

How to Handle Coronavirus-Related Layoffs in the Most Responsible Way

In addition to the widespread anxiety the current pandemic has caused, layoffs have become inevitable for many organizations The state of local and global economies is rapidly fluctuating- leaving...

Read more...

Recalling Furloughed Employees: How Ready Are You?

When recalling furloughed employees, it is crucial that you adhere to your organization’s policies and procedures Basing a decision on pre-established guidelines can help avoid violating any...

Read more...

How to Make a Clean Switch to a New Payroll Service Provider

Partnering with a payroll service provider offers significant benefits: cost savings, time savings, and minimized errors, among others To optimize these benefits, first you must find the right...

Read more...

How Long Should You Keep Employee Records?

(An Overview) The answer to the question above depends on two things: The type of record The law in your state The best first step is to consult your legal team or HR...

Read more...

Leave a Reply

Your email address will not be published. Required fields are marked *

This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business. You can also contact Payroll Systems to inquire about our HR support services.