HRA / HSA / FSA Comparison & Interaction

Health Care FSA

HRA

HSA

What is it?

It’s an account to help employees pay for eligible medical expenses. It’s an account to help employees pay for eligible medical expenses. It’s a personal bank account to help employees save and pay for qualified medical expenses.

How do you get it?

Enrollment is through the employer if they offer an FSA.  There is no need to enroll in a health plan. It’s usually connected to a health plan.  If the employer offers an HRA, enrollment is automatic when signing up for the health plan. Requires enrollment in a high-deductible health plan that meets a deductible amount set by the IRS.  Other IRS guidelines must be met in order to be eligible.

Who contributes to it?

The employee.  The employer can also contribute if they choose to. The employer.  Employee contributions are not permitted. The employee, their family, the employer, and anyone else that chooses to.

How is the money put into it?

The employer will deduct money from the employee’s paycheck, before taxes, and put it into the account. The employer may contribute on a monthly basis, or may fund the entire contribution amount at the beginning of the plan year. The employee can make deposits just like a personal bank account.  Family & the employer can also contribute.  Employee may be allowed to deposit pre-tax money from paycheck.

What happens if I don’t spend all the money in one plan year?

The employer may choose to allow a carryover up to the IRS limit of $500. The employer may allow a certain amount to be carried over into the new plan year. Since the employees owns the account, the money will remain until they choose to spend it.

When can I start using the funds?

The employee can start spending down the FSA on the first day of the plan year. Different types of HRAs each have their own rules as to when funds can be accessed.  The employer will set the rules. The employee can start spending down the HSA once enrolled in a high-deductible health plan and has opened the account.

Do I have to pay taxes on the money?

No No No

What can I pay for with it?

Medical expenses that are determined by the IRS & the employer.  This includes dental, vision, and many other health care services and supplies as listed under Section 213(d) of the Internal Revenue Code. Medical expenses that are determined by the IRS & the employer.  The employer may only allow the HRA to pay for services covered by your health plan.  Some HRAs can be used to pay for dental, vision, & other services/supplies listed under Section 213(d) of the Internal Revenue Code. Qualified medical expenses, including services covered by a health plan as well as expenses listed under Section 213(d) of the Internal Revenue Code.

Can I have other accounts with it?

Yes.  The employee can have an HRA or a dependent care FSA. Yes.  The employee can have a healthcare FSA and/or dependent care FSA. Yes.  The employee can have a limited-purpose FSA or limited-purpose HRA, which can only be used for eligible dental and vision services.

If you have…

An HRA and HSA

If during the HRA plan year, you or your employer, or your spouse or spouse’s employer, contributes to an HSA, your HRA must be restricted for the plan year. While restricted, you can only seek reimbursement for dental, vision, preventive care, post-deductible, and premium expenses from your HRA.

An FSA and HSA

If you, your employer, your spouse or your spouse’s employer are contributing to an HSA, your FSA must be a limited purpose FSA, meaning reimbursements are limited to dental and vision expenses.

An HRA and FSA

If both the FSA and HRA provide coverage for the same medical expenses, reimbursements are processed based on the ordering rules established in the plan. For example, if the plan identifies that the FSA “pay first,” your expense will be applied to the FSA until the balance is depleted and then reimburse from the HRA. However, if the HRA is limited purpose or premium only, then the HRA and FSA accounts can be accessed concurrently for different purposes.

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