HSAs, HRAs and FSAs
Tax-advantaged accounts help employers and employees get more from every health care dollar. Here's how the three most common options compare, and we'll help you decide which fits your company.
Health Savings Account (HSA)
- Paired with an HSA-qualified high-deductible health plan.
- Owned by the employee and stays with them if they change jobs; unused money rolls over every year.
- Contributions, growth and qualified medical withdrawals can all be tax-free. The IRS sets annual contribution limits.
- Employers and employees can both contribute.
Health Reimbursement Arrangement (HRA)
- Funded only by the employer, which reimburses employees for qualified medical expenses.
- The employer sets the amount and rules.
- Some HRAs, such as the Individual Coverage HRA (ICHRA) and the Qualified Small Employer HRA (QSEHRA), let employers reimburse employees for individual health insurance instead of offering a traditional group plan.
Flexible Spending Account (FSA)
- Employees set aside pre-tax money from their paychecks for medical expenses (or dependent care, with a dependent care FSA).
- Generally "use it or lose it," although employers may allow a limited carryover or a grace period.
- Can be offered alongside most health plans.
Common questions
Can an employee have both an HSA and an FSA?
Generally not a standard health FSA, because it would make them ineligible to contribute to an HSA. A "limited-purpose" FSA that covers only dental and vision expenses can be paired with an HSA.
Which option is best for a small business?
It depends on your budget, your employees and whether you offer a group health plan. We will walk you through the trade-offs. For tax questions specific to your business, check with your tax advisor.
More answers in Health Insurance Defined and our glossary.
Related services
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Dental coverage is one of the benefits employees use most and appreciate most, and it costs far less than medical coverage.