Employee Benefits

Understanding HSAs, HRAs and FSAs

There is more flexibility than ever when it comes to options for paying for health care expenses. The three most common options including:

• Health spending account
• Flexible spending arrangement
• Health reimbursement account

Health Spending Account (HSA)

Health spending accounts (HSAs) have become more common as deductible and out-of-pocket limits have increased for employees and their families. Certain health plans permit members to set aside money, pre-tax, to help pay for qualified medical, dental and vision expenses. Both employees and employers can contribute money to HSA accounts up to a limit established by the IRS each year. Money in an HSA account is owned by the employee, and can grow from year to year. These funds can be saved and invested for the future.

Flexible spending arrangement (FSA)

A health Flexible Spending Arrangement (FSA) is an employer established benefit plan that allows your employees to set aside money in an account via payroll deduction that they can use to pay for approved medical, dental and vision care expenses with pre-tax dollars.

Both you and your employees can make contributions into an FSA. FSA plans have tax advantages for employers and employees, alike – reducing employee’s income taxes and reducing employer’s payroll taxes. Funds in an FSA must be spent according to IRS guidelines, and cannot be carried forward for multiple years.

Health Reimbursement Account (HRA)

A Health Reimbursement Arrangement (HRA) is also an employer established benefit plan that allows your employees to be reimbursed for qualified medical expenses. Only the employer can make contributions into the HRA. HRAs are a vehicle that permits an employer to reduce the amount of premium they pay to an insurer for healthcare coverage, while assuming some limited risk for payment of healthcare claims up to the point where the insurance plan takes over.

Contact us today to learn more HSAs, FSAs and HRAs.