HRA

Health Reimbursement Arrangement

HSA

Health Savings Account

FSA

Flexible Spending Account

Definition

Employer funded medical expensed reimbursement plan for qualifying medical expenses

Employer and/or Employee funded account in the Employee’s name (eligible individual) for current and future medical expenses-requires a High-Deductible Health Plan and a qualified trustee or custodian

Employee and/or Employer funded account for qualifying medical expenses.

Qualifications

Any Size Group

(Only common-law employees can participate on a tax-free basis.)

Any Size Employer

(Only eligible individuals can establish an HSA.)

Any Size Group

(Only common-law employees can participate.)

Employer Tax Savings

Contributions are Tax Deductible when paid to the participant to reimburse an expense

Contributions are Tax Deductible in the year the contribution is made.

Contributions are Tax Deductible when paid to the participant to reimburse an expense.  As a result of salary reductions, lower adjusted Employee income reduces Employer matching FICA & Federal Unemployment.

Employee Tax Savings

Reimbursements for eligible expenses are excluded from income.

Contributions can be Pre-Tax or are Tax Deductible on the Employee’s personal tax return.  Funds earn interest tax-free.  Reimbursements for qualified medical expenses are excluded from income.  Employee may withdraw funds for non-medical expenses subject to income and excise tax.

Contributions are made Pre-Tax.  Reimbursements for eligible expenses are excluded from income.

Maximum Contributions

Employer determines maximum.

Lesser of annual deductible or

$3,000 (single) 

$5,950 (family)

(Additional contributions allowed for ages 55 and older-$900 for 2009)

 Partial year restrictions apply.

Employer determines Maximum.

Source of Funding

Employer

Employer, Employee, and for any other individuals.

Employer & Employee

Who Owns Unused Funds?

Employer

(Unless benefits paid from a trust)

Employee (eligible individual name on the established trust account)

If funds attributable to employee pre-tax salary reductions, the plan owns

(if an ERISA plan)

Is Fund Portable?

No, (however, it may have a post-termination spend-down feature.)

Yes- funds belong to the employee (eligible individual)

No

Do Funds Rollover?

Yes, if Employer specifies

Yes

No-however, an employer may establish a grace period that follows the end of the plan during which unused amounts allocated to the FSA may be sued to reimburse eligible expenses incurred during the grace period. The grace period may not exceed two months and fifteen days.

Funding Requirement

Not required to prefund – uniform coverage rule does not apply

Funds must be present before withdrawal is made.  Employer may contribute to HSA periodically or all at once.

Uniform coverage rule applies – claims must be paid without regard to amount contributed

2009 Deductibles

HRA not subject to a minimum deductible.  HRA may be offered in conjunction with high deductible health plan; however, deductible amount established by employer.

$1,150 min (single)

$2,300 min (family)

Health FSA not subject to a minimum deductible. FSA may be offered in conjunction with high deductible health plan; however, deductible amount is established by Employer.

Maximum Out-of-Pocket

Employer Sets Funding Levels

$5,800 min (single)

$11,600 min (family)

Employer Sets Funding Levels

Allowable Expenses & Plan Restrictions

Can be offered alone or in conjunction with a major medical plan.

Allows otherwise un-reimbursed Code 213(d) medical expenses including health insurance premiums.  May not reimburse expenses for qualified long term care services.  Employer may restrict scope of reimbursements by plan design (many plans limit reimbursement to deductibles, co-payments, coinsurance).

If participant also has an HSA, HRA must be limited to the following: dental expenses, vision expenses, expenses constituting preventive care, Premiums “suspended HRA”, and retiree only HRA.

Can only be established by those who have qualifying high deductible health plan coverage (deductible must meet statutory limit) and no disqualifying non-high deductible health plan coverage.  Employees who are entitled to Medicare cannot establish or contribute to an HSA.

Allows otherwise un-reimbursed medical Code Section 213(d) expenses excluding most premiums – employer cannot restrict the scope HSA distributions except for expenses paid with an electronic payment card so long as account beneficiary has other means to obtain funds from HSA.

Can be offered alone or in conjunction with a major medical plan.

Allows otherwise un-reimbursed Code 213(d) medical expense excluding premiums and qualified long term care services.

Employer may restrict scope of reimbursements by plan design.

If participant also has an HSA, FSA must be limited to the following: dental expenses, vision expenses, and expenses constituting preventive care.

Prescription Co-Pay

Yes

Yes

Yes

Administration

TPA

Insurance Co, Bank, TPA

TPA

Non-Medical Expense Withdrawals

NO

Taxable and Subject to 10% Penalty (no penalty if age 65 or older or disabled as defined by Code Section 72)

No