What are the comparisons between Health Savings Accounts, Health Reimbursement Arrangements, and Flexible Spending Accounts?

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Whether it's with The HSA for Life® Health Savings Account (HSA), a Health Reimbursement Arrangement (HRA), or a Health or Dependent Care Flexible Spending Account (FSA) administered by Bank of America Benefit Solutions™ there are many ways to possibly reduce health care costs for qualified medical expenses.

Please select from the following sections to see how the plans compare:


Eligibility

To be eligible for an HSA, you must meet the following requirements:

  • You must be covered by an HSA-eligible health plan. The plan doesn't have to be an employer sponsored plan, it may be individual insurance.
  • You must not have other non-qualifying high deductible health plan unless benefits limited to certain types of benefits defined in Code Section 223.
  • You must not be enrolled in Medicare.
  • You must not be claimed as dependent on other's tax return.

To be eligible for an HRA, you must be set up by an employer. Eligibility is determined by the employer and is subject to discrimination rules (that is, cannot discriminate in favor of highly compensated employees). Benefits are generally not available to self-employed individuals on a tax-advantaged basis.

To be eligible for a Health FSA, you must meet the following requirements:

  • You can only be set up by employers. Self-employed individuals cannot establish FSAs.
  • Eligibility is determined by the employer and is subject to discrimination rules (that is, cannot discriminate in favor of highly compensated employees).

To be eligible for a Dependent Care FSA, you must meet the following requirements:

  • You can only be set up by employers. Self-employed individuals cannot establish Dependent Care FSAs.
  • Your eligibility is determined by the employer and is subject to discrimination rules (that is, cannot discriminate in favor of highly compensated employees).


Who can contribute?

The following can contribute to an HSA:

  • Individual/employee
  • Employer on behalf of employee
  • Self-employed individual
  • Any person or family member on behalf of individual

Only the employer can contribute to an HRA.

The following can contribute to a Health FSA:

  • Employees contribute via pre-tax payroll withholdings through employer's Code Section 125 plan.
  • Employers have the option of contributing.

The following can contribute to a Dependent Care FSA:

  • Employees contribute via pre-tax payroll withholdings through employer's Code Section 125 plan.
  • Employers have the option of contributing.


How much can be contributed?

  • For 2009, contribution to an HSA cannot exceed $3,000 for individuals, $5,950 for families.
  • There is no limit to the amount that can be contributed to an HRA.
  • There is no limit to the amount that can be contributed to a Health FSA. However, the employer's plan must specify the maximum dollar amount or % of salary that can be contributed.
  • There is no limit to the amount that can be contributed to a Dependent Care FSA. However, the employer's plan must specify the maximum dollar amount or % of salary that can be contributed.

Who controls the use of funds?

  • The individual/employee controls the use of funds in an HSA. The employer/custodian may not require adjudication of expenses.
  • The employer controls the use of funds in an HRA. All expenses must be adjudicated by a third party as qualified medical expenses.
  • The employer controls the use of funds in a Health FSA. All expenses must be adjudicated by a third party as qualified medical expenses. Please note, however, that employees can access the entire amount designated for the year at any time during the year.
  • The employer controls the use of funds in a Dependent Care FSA. All expenses must be adjudicated by a third party as qualified dependent care expenses. Please note, however, that unlike Health FSAs, employees cannot access the entire amount designated for the year at any time during year. They can only access the accumulated balance at any given time.


What kinds of expenses can be paid?

Qualified medical expenses as defined in Internal Revenue Code (other than most insurance premiums) can be paid by an HSA.

The following expenses can be paid by an HRA:

  • Unreimbursed qualified medical expenses under Internal Revenue Code, including insurance premiums (except long-term care services).
  • Employers may restrict the scope of eligible expenses.
  • Expenses must be restricted if offered in conjunction with an HSA.

The following expenses can be paid by a Health FSA:

  • Qualified medical expenses defined by the IRS (other than insurance premiums and qualified long term care services).
  • Employers may restrict the scope of eligible expenses.
  • Expenses must be restricted if offered in conjunction with HSA.

Qualified day care, adult care, and after school care expenses can be paid by a Dependent Care FSA.


Compare portability requirements

  • An HSA is portable, even if you retire or change jobs, locations, or health plans.
  • An HRA is not portable, although you may elect to temporarily continue it under COBRA.
  • A Health FSA is not portable, although you may elect to temporarily continue it under COBRA.
  • A Dependent Care FSA is not portable.

Annual Rollover

  • An HSA may be rolled over annually.
  • An HRA may be rolled over annually if the employer chooses to do so.
  • A Health FSA may not be rolled over annually. It is a "use it or lose it" benefit.
  • A Dependent Care FSA may not be rolled over annually. It is a "use it or lose it" benefit.
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