Comparison Between HSA vs HRA
The key difference between the two accounts is that an HRA is employer-owned whereas an HSA is employee-owned.This means an HRA is left behind when an employee no longer works for that employer, and the funds are no longer accessible. With an HSA, the employee keeps the account and can transfer it when he or she changes jobs. Account holders may also invest their HSA funds once the account reaches a minimum threshold.
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More differences on HSA vs HRA can be seen below.
|Stands for||Health Reimbursement Arrangement||Health Savings Account|
|Who is eligible?||Members enrolled in a high deductible health plan (HDHP) who are not eligible for an HSA.||Members enrolled in a high deductible health plan (HDHP) who do not have any other non-HDHP health plan, including coverage under Medicare, a spouse’s health plan or flexible spending account (FSA).|
|Contribution limits||Set by employer, so varies by organization.||Individual coverage: $3,650 (2019); . Families: $7,100 (2019); . People over 55 can make an additional “catch up” contribution of $1,000. These are combined limits for employee + employer contribution to the HSA.|
|Who owns the account?||Employer or health plan owns the HRA account.||Employee|
|Contributions subject to income tax?||No||No|
|Does interest accrue?||No||Yes, but amount varies by HSA bank|
|Contributions||The employer or health plan contributes “credits” to the account every month. Some plans may credit the annual amount at the beginning of the plan year. Individual contributions are not allowed.||Employer and Employee|
|Disbursement of funds||Funds are paid out as and when expenses are incurred by the plan member up to the amount available in the account.||Only funds paid in by the member are available for healthcare expenses.|
|Catch-up contribution for older workers||No||Yes, members aged 55 to 65 may contribute up to $1,000 more to their account per year. This contribution is an “above the line” income tax deduction.|
|Balance carry over (or rollover)||Yes; unused funds are carried over to the following year.||Yes; unused funds are carried over to the following year.|
|Portability and forfeiture||No. Plan credits must be used while the member is covered by that plan. Unused credits are forfeited if the member terminates employment, (other than retirement) or changes health plans.||Yes. HSA balance is not forfeited when the member changes employers or health plans.|
|Eligible medical expenses||Qualified medical expenses defined under IRC §213(d), except for amounts distributed to pay health insurance premiums. HSAs can be used to pay premiums for Temporary Continuation of Coverage, Long Term Care, and health insurance for retirees.||Qualified medical expenses defined under IRC §213(d), except for amounts distributed to pay health insurance premiums. HSAs can be used to pay premiums for Temporary Continuation of Coverage, Long Term Care, and health insurance for retirees.|
|Non-medical expenses||No, HRA credits can only be used for medical expenses.||HSA funds can be used for non-health care distributions but are included in gross income and subject to a 20% penalty if under age 65.|
|Proof of expenses required?||Yes1 IRS regulations governing HRAs require each claim be substantiated by an “explanation of benefits” statement or through itemized receipts.||No; however, the member should be prepared to substantiate to the IRS the expense has been incurred, the amount of the expense, and its eligibility.|
HSA vs HRA
|No||Yes, but varies by HSA bank|