About Health Benefit Accounts

The following health benefit accounts may be available to help your employees save on healthcare: Health Savings Accounts (HSA), Flexible Spending Accounts (FSA) and Health Reimbursement Arrangements (HRA). All three accounts are funded by tax-advantaged contributions, and are used to pay for medical expenses like prescriptions and co-pays for doctor's appointments on a tax-favored basis. As tax-advantaged accounts, the IRS determines how the funds from each account type can be used. Check with your tax or benefits adviser to determine which account may be best for you, and your employees.
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The three accounts mainly differ by who owns them, who funds them, and who qualifies for them. All three offer tax benefits for both employers and employees, since the accounts are funded with tax-free contributions.

Health Savings Account (HSA)
Flexible Spending Account (FSA)
Health Reimbursement Arrangement (HRA)

Feature Comparison Chart Table
Feature Comparison Chart HSA FSA HRA
Pre-Tax Deductions Yes Yes No
Interest-Bearing Yes No No
Portable Yes No No
Individual-Owned Yes Yes No
Employer-Owned No No Yes
Employer Contributions Yes No Yes
Employee/Individual Contributions Yes Yes No
Associated with HDHPs Yes No Yes
Annual Contribution Rollover Yes No Yes
Loss of Unused Funds No Yes No
Annual Contribution Limits Yes Yes No

Many companies already offer an HSA, FSA or HRA as a benefit to aid recruitment and retention, as well as save money. Adding a Visa card to these accounts improves access and efficiency, and can lead to increased plan participation and employee satisfaction.
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Health Savings Account (HSA)

A Health Savings Account is designed to help people with qualifying high-deductible health plans (HDHPs) pay for current medical expenses and save for future ones. Employees can arrange contributions on their own or through their employer. The Visa Healthcare & Benefit card makes HSAs easier for HSA account holders, by connecting them directly with their funds when and where they need them, reducing paperwork and reconciliation later. HSA funds rollover from year to year which means the individual does not have to worry about losing any unspent funds at the end of the year. Some programs also offer investment options to allow the individual to save money and earn interest on HSA funds for future expenses. HSAs are owned by the individual, which means they retain the funds even if they change employers.

Tax advantages for employers

Employer contributions to an HSA on an employee's behalf are generally not subject to withholding for purposes of Federal income tax, the Federal Insurance Contributions Act (FICA), Federal Unemployment Tax Act, or Railroad Retirement Tax Act. In many cases HSA contributions are exempt from state income taxes as well. Employers should check with their tax advisers to determine their specific state rules on this.

Less administrative responsibility and cost for employers

Unlike FSA or HRA benefit plans, employers are not required by law to ensure employees use HSA funds for qualified medical expenses. Therefore, the cost of administering HSAs may be significantly lower than other benefit plans.

Flexible ATM and MCC restrictions

Visa's flexible platform allows for the Visa HSA cards to be issued either with full (both ATM & MCC), part (either ATM or MCC) or no restrictions. Issuers of Visa HSA cards have the option to restrict card usage to healthcare-related Merchant Category Codes (MCCs). If card usage is not restricted, the card may be used to pay for purchases wherever Visa debit products are accepted.*

Income for trustees and custodians

HSAs provide financial institutions with additional products and services to offer corporate banking clients, while generating new consumer accounts and services. Offering HSAs provides a new source of deposit income for financial institutions, and other possible sources of revenue, such as fee income, and investment income.
Visit the IRS website to learn more

Flexible Spending Account (FSA)

A Flexible Spending Account allows an employee to set aside a portion of their salary on a pre-tax basis to pay for qualified medical or dependent care expenses. Similar arrangements are allowed under the Internal Revenue Code for transit and parking expenses. Employees can only get an FSA through their employer and both the employee and the employer are allowed to contribute to the funds. The Visa Healthcare & Benefit card makes FSAs easier for plan holders and administrators alike, by connecting users directly with their funds and reducing paperwork for both. The Visa FSA card can be used anywhere that Visa debit is accepted making it much more convenient to use.

Pre-tax deductions

Contributions are made to these accounts on a pre-tax basis, which lowers your payroll taxes and employee income taxes, and allows contributed funds to remain untaxed.

Transit and Dependent Care

The Flexible Spending Account can also be used for dependent care expenses. Similar arrangements are allowed under the Internal Revenue Code for transit and parking expenses. Speak to your issuer about the options available for your company benefit plan.

Unused funds default to employer

If, at the end of the plan year, the employee has not used all medical or dependent care FSA contributions, he or she will lose the unused portion. The employer may keep these reverted funds subject to ERISA's exclusive benefit requirement (i.e., that plan assets must be used exclusively to provide benefits and/or offset administrative costs).

Annual contribution limits

Current law provides for a federal cap of $2500 effective 1/1/2013 for medical FSA expenses. Dependent care expenses are subject to a separate annual cap of $5,000 ($2500 if married filing separate returns). Parking expenses are subject to separate caps of $240 per month for parking and $125 per month for transit expenses (as indexed). Tax benefits do not apply to contributions above the applicable cap. Cap amounts are subject to change per the IRS so you should always consult the IRS web-site for the most current amounts.

Health Reimbursement Arrangement (HRA)

A Health Reimbursement Arrangement is usually coupled with high-deductible health coverage, to help an employee pay for qualified medical expenses. The employee can only get an HRA through his or her employer, and only the employer can contribute funds.

The Visa Healthcare & Benefit card makes HRAs easier for plan holders and administrators alike, by connecting users directly with their funds and reducing paperwork for both.

Annual contribution rollover

With HRAs, the employer determines how unused funds will be treated at year end. The employer can choose to allow the funds to roll-over or to require that unused funds will be forfeited by the employee.

No annual contribution limits

Health Reimbursement Arrangements have no set annual contribution limits. The employer decides entirely how much they will add to an account.

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* The cardholder will be subject to a penalty tax in addition to paying federal income tax on the amount. Issuers also have the option to offer or restrict cash access through ATMs. If a card is used to pay for a non-qualified expense, the cardholder is required to pay federal income tax and a 20 percent excise tax on the amount.

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