HRA vs. HSA: Let’s Compare! - Stockton & Associates

News & Tips • HRA vs. HSA: Let’s Compare!

A Health Savings Account (HSA) is a savings account linked to a qualified high deductible health plan or HDHP. It assists employees in offsetting the out of pocket expenses that come with an HDHP. Many of these accounts are funded through tax payroll deductions, which can lower employees’ tax obligations. These funds can be used to pay for eligible medical expenses set by the IRS. Employers and employees may each contribute to an HSA with caps on contributions annually.

On the other hand, HRAs, or “Health Reimbursement Accounts, are funded entirely by the employer and designed to help employees pay for qualified medical expenses. HRAs do not have contribution limits but unspent funds which may accumulate over time at the employers discretion are ultimately forfeited by the employee upon leaving a company. Think of these HRAs as promises from employers. An IOU that employees with qualifying injuries can use to pay their bills. This means that ultimately, the employer may reclaim unspent benefits.

The benefits to offering these programs are many. First, that employees have access to tax advantaged reimbursement that can be accomplished easily and efficiently with the help of an employer. Second, that employers are able to contribute money to these programs as well means employees know that their company cares for them. The programs also raise employee’s ability to take care of themselves by increasing access to care as well as smart medical consumerism. Finally, plan level distinctions allow employees to customize how much they contribute to each employee based on bonafide business classifications.

Employers can offer both HRAs and HSAs to their employees in order to maximize the individual benefits of both programs.

Sep 14, Published: and 2016. “2016 Employer Health Benefits Survey – Summary Of Findings.” KFF, 14 Sept. 2016, https://www.kff.org/report-section/ehbs-2016-summary-of-findings/.

Griffin, Jeff. Is Your High Deductible Health Plan (HDHP) HSA Qualified? https://www.griffinbenefits.com/blog/high-deductible-health-plan-hsa-qualified. Accessed 2 Dec. 2022.

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