A Battle of Savings Vehicles: HSA vs FSA vs HRA

In this article, we’ll define a health savings account (HSA), a flexible spending account (FSA), and a health reimbursement account (HRA). Plus, we’ll breakdown each of these savings vehicles and the similarities and differences between the three.

Employee benefits are expensive for both employers and employees. According to data collected through December 2017, it costs employers an average of $11.38 per hour per employee, on benefits. And a 2018 study by the Kaiser Family Foundation found the average worker paid $5,547 a year on health coverage premiums alone.

So, as an employer what can you do to help your employees while also helping yourself? Well, we have not one, but three, potential solutions to ease the cost of employee benefits. Through these savings accounts, your company can save your employees money without spending more yourself.

The Breakdown

An HSA is an individual bank account to help employees save and pay for covered healthcare expenses and qualified medical expenses. FSAs are savings accounts that reimburse you for qualified medical expenses. An HRA is an account you can use to reimburse yourself for eligible expenses.

Download a PDF comparison table of these three savings vehicles.

	Health Savings Account (HSA)	Health Reimbursement Account (HRA)	Flexible Spending Account (FSA)
Eligibility	You need to sign up for an HSA eligible, high-deductible health plan.	These plans are typically tied to a health plan. You get the HRA when you enroll in the health plan.	Your employer has to offer a healthcare FSA.
Account Ownership	Employee.	Employer.	Employer, but it’s your own money.
Contribution Limits	You. Your employer, family, and others can put money into it if they choose.	Only your employer. You can’t contribute your own money.	You. Your employer can also put money into it if they choose.
Making Contributions	You can make deposits as you do with other personal bank accounts. Your employer and family can also deposit money. Also, your employer may allow you to deposit money straight from your paycheck, before it’s taxed.	Your employer may put all the money in the account at the beginning of the plan year or may do so each month.	Your employer will take money out of each paycheck, before taxes, and put it into the account.
Employer Contributions	100% paid, regardless of utilization.	Only pays for employee utilization (usually 75%).	100% paid, regardless of utilization.
Contribution Limits	$3,550 for single and $7,100 for family	Set by the employer.	$2,750 per individual. Employers may elect a lower contribution limit.
Taxes	You don’t have to pay federal, and in most instances, state income taxes on: ·     Deposits you or others make to an HSA ·     Money you spend from an HSA on qualified medical expenses ·     Interest earned If you put money into an HSA using pre-tax payroll deposits through your employer, you don’t have to pay social security taxes on it either.	You don’t have to pay federal or state income taxes on this money.	You don’t have to pay federal, state, and Social Security taxes on this money. You also don’t have to pay federal income taxes on any money that’s reimbursed to you.
Eligibility Requirements	Must have an HSA- eligible high- deductible health plan.	All full-time employees with the possibility of including part-time employees. Owner eligibility is dependent on corporate structure.	Most full-time employees (working at least 30 hours per week) are eligible, who aren’t self-employed.
Health insurance Requirements	Yes. You must purchase an HSA- qualified high- deductible health plan.	No. But the purchase of minimum essential coverage allows you to receive reimbursements, free of income taxes.	It depends. A limited-purpose FSA doesn’t require the purchase of insurance, but you do need health insurance with a healthcare FSA.
What medical expenses are allowed?	You can pay for hundreds of qualified medical expenses, determined by the IRS. This can include services covered by a health plan.	You can pay for hundreds of eligible medical expenses, defined by the IRS and your employer. This can include services covered by a health plan.	You can pay for hundreds of qualified medical costs, determined by the IRS.
Can I have any other accounts with it?	Yes. You can have a limited-purpose FSA or limited-purpose HRA, which can only be used for eligible dental and vision services.	No.	No.
Can I rollover money from year-to-year?	Any unused funds rollover to the following year, which allows the account to earn interest and grow.	It depends on the plan setup, but unused funds typically don’t rollover.	There are three FSA options: 1.   Use it or lose it (all unspent funds are forfeited). 2.   Carryover of $500 maximum. 3.   Grace period of up to 2.5 months to use any leftover money.
Who’s the administrator?	Employee.	Employer or third- party administrator.	Employer or third- party administrator.
Is it portable after termination?	Yes. There’s continued access to unused account balance if the employee is no longer working for the employer.	No. The account cannot be maintained if the employee is no longer working for the employer.	No. The account cannot be maintained if the employee is no longer working for the employer.

The Wrap

In the battle of HSA vs FSA vs HRA, there are no losers, only winners. Regardless of which of these savings vehicles you choose, each can have a positive impact on the cost of employee benefits for both employees and employers.