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. Be sure to weigh the benefits of each before choosing one.
Take a moment to compare financial arrangements:
| HSA | HRA | FSA | |
| Availability | All groups with 2+ employees | All groups with 26+ 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 (based on 2005 requirements) |
Annual deductible $1,000/$2,000. Out-of-pocket max $5,000/$10,000. | 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 - single | Lesser of deductible or set amount* | Determined by employer | Determined by employer |
| Additional contributions | Set amount* for age 55 or older | N/A | N/A |
| Who owns contributions? | Employee | Employer | Employee |
| Are funds portable? | Yes | No | 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 | Debit Card | 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. | Employer or administrator substantiates all medical expenses. | Employer or administrator 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. Certain high deductible health plan designs are also required for an HRA. However, any PPO health plan may be paired with an 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 help administer an HRA or FSA for you.
