Health Savings Account (HSA)

A cross between a flexible spending account, an IRA, and a 401(k).  To have a federally qualified HSA, the participant must enroll and remain in a high-deductible medical plan and not be covered under any other low-deductible health plan.  Pre-tax contributions can be made by the employee through a payroll reduction plan. The participant has access to this account to pay for eligible medical expenses.  In addition, their account can grow, year-to-year, tax deferred.

Flexible Spending Account (FSA) - Limited to groups with 51+ employees

A tax-free way for your employees to save for qualified medical and dependent care expenses incurred during a single plan year.  Pre-tax contributions are taken via payroll deduction.  This reduces the federal, state, and FICA taxes that they have to pay.  Funds not used by the end of the plan year are returned to you (the employer) according to the “Use It or Lose It” rule.

Healthcare Reimbursement Account (HRA) - Limited to groups with 51+ employees

Also called fixed contribution plans, personal care accounts, or health care account plans. These are actually accounts set up by you in your employee's name.  Typically, you provide a high-deductible medical plan and establishes an HRA that pays for your employee's eligible* out-of-pocket medical expenses using employer funds.  These plans provide your employees with an incentive to be conservative in health care spending because funds left at the end of the year can be rolled over from year to year and saved for future medical expenses.

*For a listing of eligible expenses, please refer to your summary plan description or ask your benefits administrator.