This table explains the high level differences between a Health Savings Account (HSA), Health Flexible Spending Account (FSA), and Health Reimbursement Account (HRA). All accounts are designed to reduce your out-of-pocket medical expenses.
| Common Questions | HSA | Health FSA | HRA |
| What is it? | A personal bank account to help pay for your current qualified medical expenses as well as save for the future. | An employer-owned account to help you pay for qualified medical expenses that occur during your plan year. | An employer-owned account that will reimburse you for qualified medical expenses during your plan year. |
| What are the eligibility requirements? | You must be enrolled in an HSA-qualified high-deductible health plan (HDHP). The deductible cannot be less than $1,400 (2021/2022) for self-only coverage or $2,800 (2021/2022) for family coverage. If your employer doesn't offer an HSA, you can open one at your banking institution. | Your employer must offer an FSA. | Your employer must offer an HRA. |
| Who owns it? | You | Your employer | Your employer |
| Who can put money into it? | You. Your family, others, and your employer can contribute if they choose to do so. | You. Your employer can contribute if they choose to do so. | Only your employer. |
| How is money put into it? | Deposits are made like you do for other personal bank accounts. Also, your employer may allow you to deposit money from your paycheck before the money is taxed (pre-tax). | Your employer takes money out of your paycheck, before the money is taxed (pre-tax), and puts it into your account. | Your employer may put all money into your account at the beginning of your plan year or they may make monthly contributions. |
| Are there limits to how much I can put into the account? | Yes. The IRS sets an annual contribution limit. The limit is $3,600 (2021) / $3,650 (2022) for self-only coverage and $7,200 (2021) / $7,300 (2022) for family coverage. These are annual contribution limits--there are no limits to how much you can save over time. | Yes. Your employer determines the actual amount you can put in each year, but it cannot exceed the IRS limit. The limit is $2,850 (2022). | N/A. You cannot contribute your own money. The funds available are determined by your employer. |
| Can funds rollover to next year? | Yes. | The IRS allows employers to choose one of two options (or none):
| Maybe. This is determined by your employer. |
| When can I begin spending money in my account? | As soon as you open the account. | Funds are available on the first day of your plan year regardless of how much you've contributed due to the “uniform coverage" rule. | It depends. Your employer may allow the HRA to pay before you meet a deductible, or you may need to spend a certain amount out-of-pocket first. |
| Can I cash it out? | Yes, but--the money must be used for qualified medical expenses or you will have to pay taxes on it, and you may also have to pay a 20% tax penalty. After age 65, you can withdraw for any reason, but the money will be taxed if it's not a qualified medical expense. | No. | No. |
| Can I have more than 1 account at the same time? | You can have an HSA with an limited-purpose HRA, Limited-Purpose FSA (dental and vision) and/or a Dependent Care FSA (day care and elder care for tax-dependents). NOTES:
| You can have a Health FSA with an HRA and/or a Dependent Care FSA (day care and elder care for tax-dependents). NOTES:
| An HRA can complement another account (HSA, Limited-Purpose FSA, Dependent Care FSA, Health FSA). NOTE: An expense can only be reimbursed by one account. |
| Do I have to pay taxes on it? | No. You don't pay federal or, in most cases, state income taxes on:
If you put money into your HSA using pre-tax payroll deposits through your employer, you don't pay Social Security taxes either. | No. You don't pay federal, state or Social Security taxes on this money. | No. You don't pay federal, state or Social Security taxes on this money. |
| Can the money in my account earn interest? | Yes. The amount of interest you earn depends on the bank you use and how much money you have in the account. | No | No |
| Can I invest money in my account? | Yes. Investment options depend on the banking institution that holds your HSA. | No | No |
| What is a "qualified" medical expense? | Qualified medical expenses are defined by the IRS. There are hundreds of qualified medical expenses as well as dental, vision, Medicare and long term care (LTC) premiums, COBRA (when unemployed), and health premiums at age 65. | Qualified medical expenses are defined by the IRS. There are hundreds of qualified medical expenses as well as dental, vision, Medicare and long term care (LTC) premiums. (Sometimes dependent care and health insurance premiums). | Qualified medical expenses are defined by the IRS and by your employer. |
| What happens to the money if I leave my employer? | You own the account, so you keep the money. | Your employer keeps the money. | Your employer keeps the money. |
| Can I use it to pay for COBRA plan premiums? | Yes. Generally, health insurance premiums cannot be paid from an HSA, but exceptions are granted if you are collecting federal or state unemployment benefits, or you have COBRA continuation coverage through a former employer. | No | Maybe. This is determined by your former employer. |
| Can funds be used for retirement income? | Yes! After age 65, funds can be used for any reason. Qualified medical expenses will not be taxed, but non-medical expenses will be taxed. | No | No |
| Is there a deadline for reimbursing myself / filing a claim? | No. There's no time limit for reimbursing yourself as long as you had an HSA when you incurred the qualified medical expense (even if you're no longer on an HSA-eligible plan). | Yes. Reimbursements need to be filed before the end of the run-out period for your plan (this is the timeframe in the new plan year when you can still file claims for expenses incurred in the previous plan year). This timeframe is determined by your employer. | Usually. This is determined by your employer. |
What is a Limited-Purpose FSA?
A Limited-Purpose Flexible Spending Account (LPFSA) is a pre-tax benefit account used to pay for eligible dental and vision expenses. It is available to employees who are enrolled in a high deductible health plan (HDHP) with a Health Savings Account (HSA).
Because an HSA solely reimburses for qualified medical expenses, an HSA may be combined with an Limited-Purpose FSA for eligible dental and vision expenses.
What is a Limited-Purpose HRA?
Because a Health Savings Account (HSA) solely reimburses for qualified medical expenses, an HSA may be combined with a Limited-Purpose Health Reimbursement Account (LPHRA) for eligible dental and vision expenses.
What is a Dependent Care FSA?
A Dependent Care Flexible Spending Account (DCFSA) is a pre-tax benefit account used to pay for eligible dependent care services, such as preschool, summer day camp, before/after school programs, and child or elder care.
IRS Requirements:
- When filing jointly, both spouses must have W-2 earned income during the year.
- Unlike other FSAs, Dependent Care FSAs always align to the calendar year (which may or may not align with your plan year).
Last updated 11/10/22
