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.

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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

 

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