Available Reimbursement and Flexible Spending Plans

Below are a list of the various reimbursement and flexible spending plans available today. Click here for a side-by-side comparison chart.

Health Savings Account (HSA)

A health savings account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a High Deductible Health Plan (HDHP). The funds contributed to the account are not subject to federal income tax at the time of deposit. Unlike a flexible spending account (FSA), funds roll over and accumulate year-to-year if not spent. HSAs are owned by the individual, which differentiates them from the company-owned Health Reimbursement Arrangement (HRA) that is an alternate tax-deductible source of funds paired with HDHPs. HSA funds may currently be used to pay for qualified medical expenses at any time without federal tax liability or penalty. However beginning on January 1, 2011 over the counter (OTC) medications will not be eligible with HSA dollars (Sec. 9003 of H.R. 3590).

Health Reimbursement Account (HRA)

A Health Reimbursement Account (HRA) is a tax-advantaged benefit that allows both employees and employers to save on the cost of healthcare and is most commonly offered in conjunction with a High Deductible Health Plan (HDHP). HRA plans are employer-funded medical reimbursement plans under which contributions to the Plan are 100% tax deductible to the employer, and tax-free to the employee. The employer sets aside a specific amount of pre-tax dollars for employees to pay for healthcare expenses on an annual basis. The primary requirements for an HRA are that the plan must be funded solely by the employer and cannot be funded by salary reduction, and the plan may only provide benefits for substantiated medical expenses. An HRA is one of the most flexible types of employee benefit plans.

 Flexible Spending Account (FSA)

A Flexible Spending Account (FSA) is a tax-advantage financial account that allows an employee to set aside a portion of his or her earnings to pay for qualified expenses as established by the health plan, most commonly for medical expenses but often for dependent care or other qualified expenses. Money deducted from an employee's pay into an FSA is not subject to payroll taxes, resulting in a substantial payroll tax savings. The most common FSA, the medical expense FSA, is similar to a health savings account (HSA) or a health reimbursement account (HRA). However while HSAs and HRAs are almost exclusively used as components of a consumer driven health care plan, medical FSAs are more commonly offered with traditional health plans. Additionally, an FSA may utilize paper claims or an FSA debit card.