Originally posted by United Benefits Advisor.
To understand which option is best for your particular situation, it’s essential to know the differences between health reimbursement arrangements (HRAs), health savings accounts (HSAs) and health care flexible spending accounts (HFSAs).
Answers to the top questions about these account-based plans reveal many of the key differences, including contribution restrictions and tax treatment.
Who may legally participate?
- HFSA: Any employee who is also eligible to participate in a group medical plan sponsored by the employer; retired employees are eligible if most participants are active employees.
- HRA: Any employee who is covered by a group medical plan sponsored by the employer (or if the employer chooses, by the spouse’s employer); retired employees are eligible (a retiree-only plan does not have to meet the medical coverage requirement).
- HSA: Any employee who is covered by a high deductible health plan (HDHP), not covered by a plan that is not an HDHP, and not covered by any part of Medicare or eligible to be claimed as a tax dependent; individuals who are receiving Medicare may not contribute to an HSA.
May the employer impose additional eligibility requirements?
- HFSA: Yes. The employer may design the plan to cover whom it wishes as long as it meets the non-discrimination requirements.
- HRA: Yes. The employer may design the plan to cover whom it wishes as long as it meets the non-discrimination requirements.
- HSA: An employer may not limit the ability of an eligible employee to contribute to an HSA, but the employer may limit its contributions to employees participating in the HSA designated by the employer.
May an employee contribute to the account?
- HFSA: Yes, up to the lesser of $2,550 or the maximum set by the plan (any carryover does not apply toward the $2,550 cap).
- HRA: No.
- HSA: Yes, up to the total contribution limit ($3,350 in 2016 for self-only coverage and $6,750 in 2016 for family coverage); individuals age 55 or older may contribute an additional $1,000.
May an employer contribute to the account?
- HFSA: Yes, up to two times the employee’s contribution plus $500.
- HRA: Yes.
- HSA: Yes, up to the total contribution limit described above.
May another person or entity contribute to the account?
- HFSA: No.
- HRA: No.
- HSA: Yes. Anyone may contribute to an HSA, up to the total contribution limit.
Does the spouse’s coverage matter?
- HFSA: No.
- HRA: An employer may–but is not required to–integrate the HRA with coverage through the spouse’s employer.
- HSA: Yes. If the employee is covered by a non-HDHP through the spouse (which may include an HFSA or an HRA), the employee will not be eligible to contribute to an HSA.
For a comprehensive view of the differences between HRAs, HSAs and HFSAs, with comparisons for 25 additional questions, download “HRAs, HSAs, and Health FSAs–What’s the Difference?“