Differences between HRA, HSA, and FSA

FSA: Flexible Spending Account. Like an HSA and HRA, an FSA allows you to pay for many medical expenses with pre-tax dollars. Expenses such as co-pays and co-insurance are eligible. The IRS website lists all eligible medical expenses for each type of account.

An FSA is owned by the employer, but funded by the employee. The employee can contribute several thousand dollars each year from their salary to the FSA account. It varies each year. In 2022 the maximum is $2850, and in 2021 it was $2750. An FSA is a use it or lose it type of account. Most employers allow for a portion of unused funds to rollover each year, or the employer extends a grace period to use unused funds. The FSA funds stay with the employer if you leave your job.

HSA: Health Savings Account. Unlike an FSA, the employee owns the HSA. The HSA can be funded by the employer and employee, the employer alone, or the employee alone. The HSA funds are owned by the employee, and there is no time frame in which to spend the funds. HSA’s are available to anyone with a qualified high deductible health insurance policy, whether employed or not. HSA funds can roll over each year, and also become an above the line tax deduction (maximum amounts set by IRS each year.) If you are 55 and over the IRS allows you another $1000 each year as a catch-up. Monies in an HSA can be invested in CD’s, mutual funds, etc. If you no longer have an HSA qualified policy but still have money in an HSA account, you can continue paying medical expenses but cannot contribute.

HRA: Health Reimbursement Arrangement: This is simply an account that the employer owns and funds. The employer may choose how much to contribute to the employees HRA account each year, there are no limits. HRA accounts are use it or lose it. Funds stay with the employer at the end of your employment.