HSA | HRA | FSA

 

‘Health Savings Account – HSA’

A Health Savings Account (HSA) is a tax-advantaged account created for individuals who are covered under high-deductible health plans (HDHPs) to save for medical expenses that HDHPs do not cover. Contributions are made into the account by the individual or the individual’s employer and are limited to a maximum amount each year. The contributions are invested over time and can be used to pay for qualified medical expenses, which include most medical care such as dental, vision and over-the-counter drugs.

 


’Health Reimbursement Account – HRA’

An HRA, or health reimbursement account, consists of employer-funded plans that reimburse employees for incurred medical expenses that are not covered by the company’s standard insurance plan. Because the employer funds the plan, any distributions are considered tax deductible to the employer. Reimbursement dollars received by the employee are generally tax free.
A health reimbursement account is also known as a health reimbursement arrangement.

 

‘Flexible Spending Account – FSA’

A flexible spending account (FSA), also known as a flexible spending arrangement, is one of a number of tax-advantaged financial accounts that can be set up through a cafeteria plan of an employer in the United States. A FSA allows an employee to set aside a portion of earnings to pay for qualified expenses as established in the cafeteria plan, most commonly for medical expenses but often for dependent care or other expenses. Money deducted from an employee’s pay into an FSA is not subject to payroll taxes, resulting in payroll tax savings.[1] Before the Patient Protection and Affordable Care Act, one significant disadvantage to using an FSA was that funds not used by the end of the plan year were forfeited to the employer, known as the “use it or lose it” rule. Under the terms of the Affordable Care Act, a plan may permit an employee to carry over up to $500 into the following year without losing the funds.