Just as there are many different kinds of health plans, there are also different ways to save money to pay for medical expenses. You may have heard people talk about their HSA or about the HRA their company offers them, and then someone else brings up their FSA. With such similar sounding acronyms it can be understandably difficult to keep track of what these all mean.
These accounts are called Tax-Advantaged Accounts. All these accounts can be offered through an employer, each with different options for contributions both for the employer and employee. Only Health Savings Accounts (HSA) are available through both employer group health and individual insurance plans, combined with High Deductible Health Plans (HDHP).
Health Savings Accounts (HSA) – available in conjunction with either an employer group or individual HDHP, both employer and employees may contribute. Funds are rolled over from year to year.
Health Reimbursement Arrangement (HRA) – available through employer. The HRA must be integrated with the group health plan and is limited to employer contributions. Employer contributions are a non-taxable employee fringe. Funds can only be used for eligible medical expenses, determined by the employer. Funds can also be used for health, and long term care insurance premiums. Funds are rolled over from year to year.
Flex Spending Account (FSA) – available through employer, both the employer and employee may contribute. Funds are not rolled over from year to year.
Each type of account has contributions limits please see below for more detailed information:
Account Name-Health Savings Account
Account Owner-Individual or Employee
Who funds the account?-Individual Employee – with pre-taxed contributions from pay.
Health Plan Criteria-Combined with HDHP Minimum Deductibles $1,300 Individual $2,600 Family Minimum Out-of-Pocket $6,350 Individual $12,700 Family.
Calendar Year Contribution Limits-$3,350 Individual $6,650 FamilyAge 55+ $1,000 Catch-up
Eligible Expenses for reimbursement-IRS Code Section 213(d) for medical expenses COBRA & QLTC insurance premiums; health premiums under certain circumstances.
Other Options Available-Yes, as taxable income with a 20% penalty (no penalty if distributed after death).
Interest Bearing Accounts-Yes, accrues tax-free.
Account Name-Health Reimbursement Arrangement.
Account Owner- Employer
Who funds the account?- Employer
Health Plan Criteria-Must be integrated with group health plan coverage.
Calendar Year Contribution Limits- No limit
Rollover Options- Yes
Eligible Expenses for reimbursement-IRS Code Section 213(d) for medical expenses Health & QLTC insurance premiums Employer has the option to define eligible medical expenses.
Other Options Available- No
Interest Bearing Accounts-Yes, paid to the employer.
Account Name-Health Flexible Spending Account
Who funds the account?-Employee – with pre-taxed contributions from pay.
Health Plan Criteria-Plan must qualify as excepted benefits to satisfy ACA reform.
Calendar Year Contribution Limits-$2,550.
Rollover Options-No, Exception: If employer chooses $500 of unused funds can be rolled over.
Eligible Expenses for reimbursement-Section 213(d) medical expenses Employer defines eligible medical expenses.
Other Options Available-No
Interest Bearing Accounts-No