FINANCIAL ARRANGEMENTS - HSA/HRA/FSA
Three types of financial arrangements can be coupled with a High Deductible Health Plan - a Health Savings Account (HSA), Health Reimbursement Arrangement (HRA) or Flexible Spending Account (FSA).
Pre-tax and tax-deductible dollars contributed to these arrangements can be used for IRS-approved qualified medical expenses such as copays, deductibles, coinsurance and prescriptions. HSAs even allow you to pay for vision care, long-term care insurance premiums, COBRA premiums and more.
Each type of financial arrangement is unique in its design, administration and use. Adding a financial arrangement makes the cost burden to your employees a little easier. Be sure to weigh the benefits of each before choosing one.
Here are a few things to keep in mind about each:
- HSA
- You and/or your employees may contribute to the account.
- Your employee owns these funds and can take them from job to job.
- These funds roll over annually, and earn interest tax-free.
- HRA
- Employers own these arrangements, and only you can contribute to it.
- You set the opening balance and which expenses are reimbursable.
- You maintain available assets to cover potential expenses.
- FSA
- Employees contribute funds through pre-tax payroll deductions.
- Any PPO plan can accompany this financial arrangement
- Funds don't rollover and are not portable.
|
HSA |
HRA |
FSA |
Availability |
All groups with 2+ employees |
All groups with 2+ employees |
All groups with 2+ employees |
Eligibility |
Employees, retirees & self-employed covered by an HDHP |
Employees & retirees |
Employees |
Qualified HDHP enroll. necessary? |
Yes |
No |
No |
Qualified HDHP requirements |
Annual deductible $1,150/$2,300. Out-of-pocket max $5,800/$11,600. |
N/A |
N/A |
Who administers financial plan? |
Bank or financial institution |
BlueCross BlueShield of Tennessee |
BlueCross BlueShield of Tennessee |
How are funds contributed? |
IRA type account/Payroll deduction |
Employer assets |
Employer assets/Payroll deduction |
Account pre-funded by employer? |
Not typically, but yes, it can be if employer elects. |
Determined by employer |
Yes |
Maximum contributions – 2009 |
$3,000/$5,950 |
Determined by employer |
Determined by employer |
Additional contributions - 2009 |
$1,000 for age 55 or older |
N/A |
N/A |
Who owns contributions? |
Employee |
Employer |
Employee |
Are funds portable? |
Yes |
Typically no, but dependent on employer |
No |
Funds rollover annually? |
Yes |
Employer determines |
No, but employees can use funds for 2 1/2 months into new plan year |
Funds earn interest? |
Yes |
N/A |
No |
Utilization/reimbursement? |
Debit Card or check |
Automatic Reimbursement or Debit Card |
Automatic Reimbursement or Debit Card |
Reimbursable expenses |
Defined in IRS Section 213d, and certain qualified premiums. |
Copays, deductibles and coinsurance only |
Defined in IRS Section 213d. |
Tax treatment for employee contributions |
Post-tax "above the line" deductions |
N/A |
Pretax from gross income |
Tax treatment for employer contributions |
All employer contributions excludable from employee's taxable income. |
All employer contributions excludable from employee's taxable income. |
N/A |
Employer tax savings |
Business expense - 7.65% of employee contribution |
Business expense - deduction for payments |
Business expense - 7.65% of employee contribution. |
Claim substantiation |
Only employee maintains supporting tax records. |
BCBST substantiates all medical expenses. |
BCBST substantiates all medical expenses. |
Withdrawls for non-qualified expenses |
Taxable, plus 10% penalty |
N/A |
N/A |
Employer reporting requirements |
Employer contributions |
Not required |
N/A |
An HSA-compatible or qualified high-deductible health plan is required to participate in an HSA. However, any HDHP or PPO health plan may be paired with an HRA or FSA.
HSAs may be set up through a bank or financial institution. BlueCross BlueShield of Tennessee can help arrange an HSA through our financial partner. Or, we can also administer an HRA or FSA for you.
