| 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 |
Sign up to get new blog posts delivered to your email. Just enter your email address and click subscribe:
