HSA and FSA and HRA—oh my!
With all of these HR acronyms flying around, it can be difficult for both employers and employees to fully grasp the nuances of different benefit accounts and make an informed decision about which account is appropriate.
Enjoy this quick Benefit Accounts 101 rundown where we’ll discuss the differences in each benefit account type and help guide you in the right direction to selecting the accounts that are best for your organization and your employees!
Health Savings Account (HSA)
A health savings account is a flexible, tax-advantaged account that can only be used with a high deductible health plan. Contributions are permitted from both the employer and the employee and are tax-advantaged. The employee owns the HSA, the funds never expire and the funds can roll over to a different employer.
Flexible Savings Account (FSA)
The most versatile benefit account, a flexible savings account allows both employees and employers to contribute money into a tax-advantaged savings account. There are four different types of FSAs: medical, limited medical, combination and dependent care. An FSA is owned by the employer but both parties can contribute, and contributions are tax-advantaged, which is an enticing perk.
Health Reimbursement Account (HRA)
A health reimbursement account is an employer-owned and funded benefit account that allows employees to save pre-taxed dollars on medical expenses. An HRA can be advantageous because it can be configured to work with any group health plan, including design, contributions, eligible expenses and rollover options. An HRA is less flexible for employees but gives the employer more control over the account and configuration.
Comparing Benefit Accounts
HSA vs FSA vs HRA
Which Benefit Account Is Right For My Organization?
Of course, deciding what benefit account is right for your organization will depend on your budget and organizational goals. However, we can provide you with a few helpful usage stats from our 2019 Benefits Benchmark Report.
As the most restrictive plan, the Health Reimbursement Account (HRA) was the least popular benefit account, with only 2% of our benefit account customers offering that particular account to employees.
On the opposite end of the spectrum, the Flexible Spending Account (FSA), which offers more freedom and flexibility than any of the other accounts, was the most popular options with 70% of our current benefit account customers offering this account.
Health Savings Accounts (HSAs) must be paired with a high deductible health plan, and we found that 90% of our customers that offer an HDHP are also offering an HSA.
Keep in mind that you can offer more than one type of benefit account. For example, you can offer an HSA and an FSA, which will help cover costs for both your HSA and non-HSA health plans.
If you do offer more than one type of account, be sure to have a solid understanding of the nuances of how accounts can work together. For example, an HSA must be paired with an HDHP and, while an employee with an HSA can also use an FSA, the FSA must be a limited purpose account, meaning reimbursements are limited to dental and vision plans.
Need Help Explaining Benefits Accounts?
With an overwhelming amount of information during open enrollment and short attention spans, clearly and concisely explaining a new benefit account can be a challenge. Cater to these challenges by incorporating video into your benefits education strategy! Video can be housed via a digital library for on-demand reference or placed directly within the benefits shopping experience (if your benefits enrollment system allows) for real-time education.
A Health Plan’s Best Friend
Are you considering offering benefit accounts to help employees cover potential gaps in their health care coverage? If so, you’ve come to the right place. Contact us below to schedule a chat about how a benefits account can compliment your benefits portfolio.