HRAs, HSAs, and Health FSAs – What’s the Difference?
Health reimbursement arrangements (HRAs), health savings accounts (HSAs) and health care flexible spending accounts (HFSAs) are generally referred to as account-based plans. That is because each participant has their own account, at least for bookkeeping purposes. Under the tax rules, amounts may be contributed to these accounts (with certain restrictions) and used for health care on a tax-favored basis.
The Patient Protection and Affordable Care Act (ACA) has added new requirements that affect HRAs and HFSAs. Most HFSAs and HRAs will need to be amended to meet the new ACA requirements. HSAs generally are not affected by the ACA.
Most recently, the 21st Century Cures Act (Cures Act) provided a method for certain small employers to reimburse individual health coverage premiums up to a dollar limit through HRAs called “Qualified Small Employer Health Reimbursement Arrangements” (QSE HRAs).
For details on the main characteristics of these type of accounts to help you decide which option is the best for your organization, review this helpful chart on HRAs, HSAs, and Health FSAs created by United Benefits Advisors.