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HRA |
HSA |
FSA |
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Health Reimbursement Arrangement |
Health
Savings
Account |
Flexible
Spending
Account |
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| History |
IRS Code 105(h) passed
in 2002 |
IRS Code 223 passed
in 2003 |
IRS Code 125 passed
in 1978 |
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| Overview |
The funding option that gives the employer
the most control. Employer determines what
services are covered, and retains control over
unused funds. |
HSAs are created at financial institutions
in the employees' names and allow them to save
and pay for medical expenses tax-free. Requires
enrollment in a HDHP. |
FSAs allow employees to pay for medical expenses
(deductibles, copays, etc.) tax-free. Requires
employer involvement. |
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| Account Owner |
Employer |
Employee |
Employee |
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| Earnings Investments |
Generally, no earnings paid. |
Generally interest paid and investments allowed. Earnings
grow tax-free. |
No earnings paid. |
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| Excluded Persons |
S-Corp, LLC, LLP, Partnership Owners, & their
Spouse; Non-dependent
domestic partners |
Medicare enrolled persons (cannot fund H S
A but can continue to claim money already set
aside in the H S A trust account); Non-Dependent
Domestic partners. |
S-Corp, LLC, LLP, Partnership Owners, & their
Spouse: Non-dependent
domestic partners. |
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| Employer
Tax Savings |
Contributions are tax-deductible when paid
to the participant to reimburse an expense. |
Contributions are tax-deductible in the year
the contribution is made. |
Contributions are tax-deductible when paid
to the participant to reimburse an expense. As
a result of salary reductions, lower adjusted
employee income reduces employer-matching FICA & federal
unemployment. |
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| Employee
Tax Savings |
Reimbursements for eligible expenses are excluded
from income. |
Contributions can be pre-tax or are tax-deductible
on the employee’s personal tax return.
Funds earn interest tax-free. Reimbursements
for qualified medical expenses are excluded from
income. Employee may withdraw funds for non-medical
expenses that are subject to income and excise
tax. |
Contributions are made pre-tax. Reimbursements
for eligible expenses are excluded from income. |
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| 2008 Maximum
Contributions |
Employer determines maximum contribution. |
Lesser of annual deductible or $2,900 (self-only),
$5,800 (family). Additional contributions up
to $900 allowed for ages 55 and older. |
Employer determines maximum contribution for
health care FSA. Child care FSA is limited
to $5,000. |
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| Source of
Funding |
Employer |
Employer, employee and for any other individuals |
Employer and employee |
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| Who owns
Unused Funds? |
Employer |
Employee (eligible individual name on the established
trust account) |
Employer |
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| Is Fund Portable? |
No |
Yes, funds belong to the employee (or eligible
individual). |
No |
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| Do funds
Roll Over? |
Yes, if employer specifies. |
Yes |
No. However, an employer may establish up to
a 2 1/2 month grace period. |
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| Eligible Medical Expenses |
213 medical expenses; including health-related
premiums and long term care insurance premiums;
excludes LTC services |
213 medical expenses; excludes most health
related premiums unless unemployed; includes
long term care premiums & services |
213 medical expenses; excludes any health related
premiums |
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| Funding Requirement |
Not required to pre-fund - uniform coverage
rule does not apply. |
Funds must be present before withdrawal is
made. Employer may contribute to HSA over time
or all at once. |
Uniform coverage rule applies. Claims must
be paid without regard to contribution amount. |
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| 2008 Deductible |
An HRA is not subject to a minimum deductible (deductible
amount is established by employer). |
$1,100 min self-only $2,200
family |
Healthcare FSA is not subject to a minimum
deductible. |
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| 2008
maximum Out-of-Pocket |
Employer sets levels. |
$5,500 self-only
$11,000 family |
Not applicable. |
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| Allowable
Expenses and Plan Restrictions |
Can be offered alone or in conjunction with
a major medical plan. Allows otherwise unreimbursed
Code 213(d) medical expenses, including health
insurance premiums. May not reimburse expenses
for qualified long-term care services. Employer
may restrict scope of reimbursements by plan
design. If participant also has an HSA, HRA must
be limited to dental expenses, vision expenses
and expenses constituting preventive care. |
Can only be established by those who have qualifying
high-deductible health plan coverage (deductible
must meet statutory limit) and no disqualifying
non-high deductible health plan coverage. Employees
who are entitled to Medicare cannot establish
or contribute. Allows otherwise unreimbursed
medical Code Section 213(d) expenses, excluding
most premiums. Employer cannot restrict the scope
of HSA distributions, except for expenses paid
with an electronic payment card. |
Can be offered alone or in conjunction with
a major medical plan. Allows otherwise unreimbursed
Code 213(d) medical expenses, excluding premiums
on qualified long-term care services. Employer
may restrict scope of reimbursements by plan
design. If participant also has an HSA, FSA must
be limited to dental expenses, vision expenses
and expenses constituting preventive care. |
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| Non-Medical
Expense Withdrawals |
No |
Taxable and subject to a 10 percent penalty
(no penalty if age 65 or older, or disabled as
defined by Code Section 72). |
No |
