About Health Benefit Accounts
Health benefit accounts are designed to help you save on healthcare expenses by paying with pre-tax earnings. They come in three varieties: Health Savings Account (HSA), Flexible Spending Account (FSA) and Health Reimbursement Arrangement (HRA). All three accounts are funded by tax-advantaged contributions made throughout the year, and used to pay for things like prescriptions and co-pays for doctor’s appointments. As tax-advantaged accounts, the IRS determines how the funds can and can’t be used. Check with your tax or benefits adviser to determine which account may be best for you.
See a complete list of qualified expenses on the IRS website
The three accounts mainly differ by who owns them, who funds them, and who qualifies for them. All three offer tax benefits for you, since the accounts are funded with tax-free contributions.
|Feature Comparison Chart||HSA||FSA||HRA|
|Pre-Tax DeductionsContributions made to these accounts are done so on a pre-tax basis, which lowers your payroll taxes and allows contributed funds to remain untaxed.||No|
|Interest-BearingContributions made to these accounts will yield an interest rate, serving as a valuable savings account similar to 401k or an IRA.||No||No|
|PortableThis indicates the ability to move your account from one employer to another.||No||No|
|Individual-OwnedContributions made to these accounts are held by the individual, and can be withdrawn at any time and without penalty for qualified purchases.||No|
|Employer-OwnedContributions made to these accounts are held by the employer and cannot be transferred outside of the company.||No||No|
|Employer ContributionsFunds can be provided by the employer and deposited into these accounts.||No|
|Employee/Individual ContributionsFunds can be provided by the employee or individual owner and deposited into these accounts.||No|
|Associated with HDHPsThese accounts are almost always used in conjunction with lower-cost High-Deductible Health Plans.||No|
|Annual Contribution RolloverIf, at the end of the year, you have not used the funds in this type of account, you do not lose any of your contributions. Instead, they accumulate from year to year until used.||No|
|Loss of Unused FundsIf, at the end of the plan year, you have not used all funds in this type if account, you will lose the unused portion.||No||No|
|Annual Contribution LimitsFor these accounts, federal caps allow only a certain amount to be deposited each year. Tax benefits do not apply to contributions above the applicable cap.||No|
To sign up for your company’s health benefit program, talk to the person in your company who handles benefit enrollment - usually HR. FSAs and HRAs are offered at hire and once a year during open enrollment. If you sign up for a high-deductible health plan during open enrollment your employer may offer a HSA at that time. You can also sign up for an HSA without going through your employer. Be sure to ask about Visa card access when selecting an account.
Health Savings Account (HSA)
The Visa HSA Healthcare card gives you direct access to your HSA funds when and where you need them. An HSA is a savings account designed to help people with qualifying high-deductible health plans (HDHPs) pay for current medical expenses and save for future ones. If you’re eligible for an HSA, you can arrange contributions on your own or ask your employer if they offer HSA contributions.
Get a Visa HSA Healthcare card now
Save money on taxes
Contributions are treated as tax-advantaged and 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. You should check with your tax or benefits adviser to determine your specific state rules on this.
Earn interest to maximize your contribution amount
The funds you contribute to your HSA can be invested, just like a 401k. The interest you earn grows tax-free and is added to your HSA funds.
Take your account with you
HSA funds are individually owned which means even if you leave the employer that you got your high-deductible health plan through, the funds in your HSA stay with you as long as you have a qualifying high-deductible health plan. You can also continue to contribute to the account as long as you have a qualifying high-deductible health plan.
Rollover your annual contribution
The funds you contribute to your health savings account remain available at the end of the plan year, and continue to grow as long as you contribute to them. Never worry about losing money simply because you didn’t get sick all year. In fact, funds in an HSA can grow over many years and be there for you to depend on when you retire.
Annual contribution limits
For health savings accounts, federal caps allow only a certain amount to be deposited each year. Tax benefits do not apply to contributions above the applicable cap. Check with your benefits account provider to find out what the IRS limits are for your account.
Flexible Spending Account (FSA)
The Visa FSA Healthcare card gives you direct access to your FSA funds. An FSA allows you to set aside a portion of your salary on a pre-tax basis to pay for qualified medical expenses. Some employers also offer dependent care, or transit FSAs and you can only get an FSA through your employer.
Save money with pre-tax deductions
Contributions are made to these accounts on a pre-tax basis, which lowers your income taxes and allows contributed funds to remain untaxed.
Transit and Dependent Care
Many Flexible Spending Accounts 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 employer about the options available in your company benefit plan.
Maximum annual contributions
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 ($2,500 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. Your employer will let you know what the allowable limits are for your account.
If, at the end of the plan year, you have not used all medical or dependent care FSA contributions, you will lose the unused portion. However, many benefit administrators will provide you with a regular notice of spend and available balance to help you manage your funds.
Health Reimbursement Arrangement (HRA)
The Visa HRA Healthcare card gives you direct access to your HRA funds. An HRA is usually coupled with high-deductible health coverage, to help you pay for qualified medical expenses. You can only get an HRA through your employer, and only your employer can contribute funds.
Funded and controlled by employer
HRAs are funded entirely by employers, and, as an account holder, you are not allowed to contribute funds of any kind. The employer also has a large amount of control over the rules of the account such as spend restrictions or rollover rules for unused funds. For more specific details of your HRA, talk to your employer.
No annual contribution limits
HRAs have no set annual contribution limits. Your employer chooses how much they will contribute to your HRA, and can contribute as much or as little as they like.
Annual contribution rollover
If, at the end of the year, you have not used the funds in your HRA, you do not automatically lose the remaining balance of the contributions. Your employer determines what happens to the funds if you have funds available at the end of the year, leave the company, and other features. Ask your plan administrator for details.