Health savings accounts and reimbursement arrangements offer money-saving benefits and tax advantages to help offset health care costs. But who’s responsible for making contributions? What happens if you switch jobs? And what are the tax advantages? We’ll answer these questions and more.
Explore the differences between Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs).
| HSA (Health Savings Account) | FSA (Flexible Spending Account) | HRA (Health Reimbursement Arrangement) | |
| Who can make contributions? |
|
|
|
| Account owner | Individual | Employer | Employer |
| Portable | Yes | No | No |
| Rolls over | Yes | No | Optional |
| Tax advantages |
|
|
|
| Plan qualifications | Must be used with an HSA-qualified High Deductible Health Plan (HDHP) | Must be used with a cafeteria plan | Can be used with any health plan |
| Earns interest | Yes | No | No |
*For qualified medical expenses
How It Works
An HSA is designed specifically for individuals participating in an HSA-qualified High Deductible Health Plan (HDHP). Contributions are kept in an interest-bearing investment account that you own and manage. You use the funds directly to pay for or reimburse yourself for eligible medical expenses.
Why Use It
Your contributions and your employer’s contributions to an HSA, and any earnings on the account, are tax-free. Withdrawals are also tax-free when used for qualified medical reimbursement. Withdrawals can be requested as the expenses are incurred or at a later date. The money in an HSA rolls over yearly and belongs to you, meaning it is yours to take if you leave your employer.
How It Works
You set aside a portion of your paycheck in an account with your employer. Then, you use this account to pay directly or be reimbursed for certain eligible, out-of-pocket medical, vision and dental expenses. For most plans, any unused dollars remaining at the plan year’s end revert to your employer and are non-reimbursable.
Why Use It
You immediately lower your taxable income with pre-tax dollars set aside to pay for eligible expenses.
How It Works
An HRA is generally offered to employees with a higher-deductible, lower-cost health plan. However, it can be offered with any plan. With this arrangement, your employer agrees to reimburse you for qualified claims after you reach a certain out-of-pocket limit, which is determined by the employer.
Why Use It
An HRA complements higher deductibles by protecting you against the greater out-of-pocket expenses associated with this type of coverage.
Want tips to maximize each of these money-saving tools? Download our helpful resource for HSAs, FSAs and HRAs. To fully understand the potential tax advantages and eligibility requirements, consider consulting a tax professional.
At GuideStone®, our mission is to enhance financial security and resilience for those who serve the Lord. We strive to provide resources to help you understand your options and save on health care coverage. For more information, contact us at Insurance@GuideStone.org or 1-844-INS-GUIDE (1-844-467-4843), Monday through Friday, from 7 a.m. to 6 p.m. CT.
GuideStone welcomes the opportunity to share this general information. However, this article is not intended to be relied upon as legal, tax or medical advice.
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