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Comparison: HSA, HRA, FSA, MSA

Health Savings Account (HSA) Health Reimbursement Arrangement (HRA) Health Flexible Spending Arrangement (FSA) Archer Medical Savings Account (MSA)
Description Tax-free account to pay for qualified medical expenses and serve as a retirement savings account Employer-funded account to reimburse employees’ qualified medical expenses Plan that allows employees to set aside pre-tax money on an annual basis to pay for qualified medical expenses Tax-exempt account to help self-employed and small business employees pay for qualified medical expenses
Eligibility Criteria Must be: Covered under a High-Deductible Health Plan that meets federal requirements; Not covered by other plan that is not HDHP (some exceptions); Not entitled to benefits under Medicare; May not be claimed as dependent None None Must be: Covered under a High-Deductible Health Plan; Not covered by other plan that is not HDHP (some exceptions); Self-employed or an employee of a business with 2 to 200 employees (some exceptions). Those with Medicare are entitled to Medicare Advantage MSAs though none currently exist.
Who Establishes Account Individual Employer on behalf of employees; self-employed are not eligible Employer on behalf of employees; self-employed are not eligible Individual
Account Funders Employee, employer or both Employer only – through money or credits Employees (by having pre-tax money withheld from their paychecks) and/or employers Employee or employer, but not both in the same year
Who Controls Use of Account Funds Individual Employer Employee Individual
Annual Contribution Limits Federal limit of $2,850 (self-only) or $5,650 (family) as of 2007 No federal limits None but the plan must set either a maximum dollar amount or percentage of compensation Up to 75% of the annual deductible (65% for self-only)
Annual Limit on Deductible/Out-of-Pocket Expenses For in-network services: $5,500 for single and $11,000 for family coverage N/A N/A $2,700 for single coverage deductible, $5,450 for families
Rules on Unused Funds Can be carried over from year to year; can be taken with employee when they retire or change jobs Employers determine whether and how much can be carried over at the end of the year; the balance of unused funds cannot be refunded to employee; COBRA enrollees are entitled to HRA balance as well as to current employer
contributions
Funds are “use-it-or-lose-it”: must be used to pay for a year’s expenses by March 15 of the following year or they will be forfeited to employer Can be carried over from year to year; can be taken with employee when they retire or change jobs
Portability Yes No No Yes
Required Companion Plan A high-deductible plan (HDHP) – minimum $1,050 self only, $2,100 family, in 2007. None required though HDHP is often offered None required A high-deductible plan (HDHP) – minimum $1,800 self only, $3,650 family, in 2007.
Medical Expenses Covered Qualified expenses including deductible and other doctor, hospital and prescription fees not paid by insurance; cannot be used to pay for premiums except when individual is unemployed; preventive care expenses may be exempt from deductible Employer can restrict types of services for which funds can be used; can be used for medical premiums Qualified expenses including deductible and other doctor, hospital and prescription fees not paid by insurance; cannot be used to pay for premiums Qualified expenses including deductible and other doctor, hospital and prescription fees not paid by insurance;
cannot be used to pay for premiums
Non-Medical Expenses Covered Taxed as income plus 10% additional tax if under 65 Taxed as income Not allowed Taxed as income and 15% additional tax on those not disabled nor over 65
Tax Treatment of Contributions Employer contributions are not taxable income and are tax-deductible for employer; individual contributions are tax-deductible; funds used for qualified medical expenses are tax-free; interest earned is tax-free Employer contributions are not taxable income and are tax-deductible for employer; individual contributions are tax-deductible; funds used for qualified medical expenses are tax-free Employer contributions are not taxable income and are tax-deductible for employer; individual contributions are tax-deductible; funds used for medical expenses may be tax-free; funds that have not yet been deposited can be used for medical expenses Employer contributions are not taxable income and are tax-deductible for employer; individual contributions are tax-deductible; funds used for medical expenses may be tax-free; interest earned is tax-free
First Available 2004 2000 1978 1996
# of Enrollees 103 million as of 3/05 26 million as of 1/05 An estimated 20 million employees are enrolled (Employers Council on Flexible Compensation) Set at 750,000 though in 2003, it was estimated the number of enrollees was fewer than 80,000
Enabling Legislation Medicare Prescription Drug, Improvement, and Modernization Act of 2003, amended by Tax Relief and Health Care Act of 2006 Treasury Department Revenue Ruling 2002-41 in 2002, and IRS Guidance 2002-45 Revenue Act of 1978 Health Insurance Portability and Accountability Act (HIPAA) of 1996