HSA vs. HRA: Similarities and Differences

The health benefits industry is full of options and acronyms. We’ve talked about the difference between a Health Savings Account (HSA) and a Flexible Spending Account (FSA). Two other commonly mixed-up options are Health Savings Account (HSA) and Health Reimbursement Arrangements (HRA).?

What is an HRA??

An HRA is a tax-advantaged employer-owned health spending account that allows employees to save on qualified medical expenses. Some key points to remember about an HRA are that: (1) it offers tax benefits, and (2) only employers are allowed to contribute money to the accounts. Employers tend to have more say in the amount of money that will roll over from year to year in an HRA.?

The Differences Between an HSA and an HRA

The HSA and HRA aim to help people save on health care expenses and reduce rising healthcare costs. The accounts encourage employees to take more ownership of their healthcare decisions and use deductible-based health plans. However, they go about it in a slightly different fashion.?

Account Ownership: One of the most important differences is that the HRA is employer-owned, and the HSA is employee-owned. The implication is that the HSA is portable, and the employee can take it along. They can invest the money and use it as a retirement savings vehicle. It is a huge advantage to employers and their employees who are forward-thinking about retirement savings and future healthcare costs. Also, employees can use the account as an employee retention tool.? On the other hand, since the HRA is employer-owned, employees forfeit their accounts when moving to another job.?

Roll Over Amount: The money in an HSA will roll over from year to year, giving employees a chance to build an account balance with unused money to save for rainy day healthcare expenses or, as mentioned before, retirement healthcare costs. The contribution limits each year are set by the IRS. In contrast, employers will decide the amount of money that rolls over year to year in an HRA.?

Contribution limits: The IRS sets contribution limits for the HSA. This year they are capped at $3,850 for self-only coverage and $7750 for a family. However, the IRS does not set a limit for the HRA.

Both the HSA and the HRA offer multiple benefits for your employees. Most importantly, the opportunity to allow your employees to save money on healthcare is immeasurable in uncertain times.?

Join us live every week on the Right Way to HSA at noon PT on LinkedIn or Twitter.

This week we discuss:

• What is an HRA??
• What are some of the similarities and differences between an HSA and an HRA??

Can’t watch us live? Watch the replay on LinkedIn, Youtube, or Twitter!