FSA, HRA, HSA INFORMATION

Flexible Spending Account (FSA)

Funded by:

FSAs are funded by the employee. However, employers may choose to contribute also.

Contribution limits:

FSA participants can make pre-tax contributions (before taxes are taken out of your paycheck), Currently, the maximum FSA maximum is $2,650. See IRS website for more current amounts.

Eligible expenses:

You can use your FSA to pay for a wide array of out-of-pocket medical expenses that are approved by the IRS. These expenses can be for yourself or your dependents. Expenses such as; prescriptions, eye care, dental care, and first aid supplies.

Rollover or Grace Period:

For FSA funds that remain at the end of the plan year, you have three options:

  1. Use it, because all unspent funds are forfeited.

  2. You can carry over up to $500 to the next year.

  3. You have a grace period of 2.5 months to use the leftover money.

Check your FSA plan documents to find out what your plan offers.

Portability:

FSAs are not portable. This means you cannot take it with you when you leave, get fired or retire from your job. The account is owned by your employer.

Need to know!

You can use the full annual election amount on day one of the plan year; you do not need to wait for the account balance to build.

Health Reimbursement Arrangement (HRA)

Funded by:

 HRA accounts are owned and completely funded by the employer. Employees are not allowed to contribute and your benefit amount does not count as income.

Contribution limits:

Employers determine the contribution amount for the account each year, no government limitations exist on contribution amounts.

Eligible Expenses:

HRA funds can be used to pay for qualified out-of-pocket medical expenses for yourself and your dependents. Eligible expenses are determined by the employer (but must be approved by IRS) and may vary from one company to the next. Traditional HRA may not be used to pay for health insurance premiums.

Beginning January 1, 2017, qualified small employers may offer separate HRAs that can be used to pay for health insurance premiums, in addition to healthcare expenses.  

Rollover or Grace Period:

Unused HRA funds may rollover according to how the plan is set up.

Portability:

HRA plans are not portable as they are employer-owned. When an employee leaves, gets fired or retires, the HRA funds stay behind.

Employers can set up a retirement HRA which will allow continuation of the plan.

Need to know!

You usually have to pay for the expense first, then file paperwork for reimbursement. 

Health Savings Account (HSA)

Funded by:

HSAs are owned and funded by the employee. Employers may contribute.

Contribution limits:

In 2019, individuals may contribute a maximum $3,500 and families may contribute $7,000. 

Eligible expenses:

You may use your HSA to pay for a wide array of out-of-pocket medical expenses (IRS-approved), including COBRA, long-term care premiums and Medicare Parts A / B.  

Plan requirement:

You must be in a high deductible health plan (HDHP) to be eligible for an HSA. You must be in a HDHP in order to make contributions.

Tax advantages:

  • Contributions are tax-free

  • Withdrawals for qualified medical expenses are tax-free

  • Interest and investment earnings are tax free

Rollover or Grace Period:

At year end, any unused funds will rollover to the next year, allowing your account to grow.

Investment:

You may invest your HSA money after you meet a minimum amount, which varies by plan provider. 

Portability:

HSA stay with the employee for the life of the account, even if you leave, get fired or retire.

Need to know!

  • Catch-up contributions: When the account owners turn age 55, they can contribute an additional $1,000 per year beyond the annual limit

  • At 65, account owners can use their HSA funds for non-medical expenses. That money will then be treated as income but will not penalized.