Reimbursement account basics

FSAs, HRAs and HSAs are all types of reimbursement accounts to help pay for your health care expenses. Here you’ll find some general information about the accounts, how they work and how they differ. The Internal Revenue Service has important eligibility rules and contribution limits for each account.

Which type of account is right for me?

  Flexible Spending
Account
FSA		 Health Reimbursement Arrangement
HRA

Health Savings Account HSA
Overview A health care FSA empowers members to set aside pretax money to pay for eligible medical expenses.1 Members do not keep their unused FSA money, and funds may be forfeited back to their employers. FSAs are generally paired with traditional health plans. An HRA is owned and funded by the employer and is designed to help members bridge the gap on eligible health care expenses. HRAs are highly customizable and a great way for organizations to offset rising costs. Common eligible expenses include deductibles, coinsurance and copays.2 An HSA lets you use pretax money to pay for qualified medical expenses.3 HSAs require an HSA-qualified health plan in order to contribute. You can invest HSA dollars and grow tax-free earnings. Funds never expire — even if you change health plans or employers or retire.
Health plan type Traditional health plan Either HSA-qualified or traditional health plan (integrated with an ACA-compliant health plan)

HSA-qualified/high-deductible health plan
Account ownership Employer-owned (you cannot take your FSA with you) Employer-owned (you cannot take your HRA with you)

Member-owned (you can take your HSA with you)
Who contributes? Member, employer Employer only Member, employer or family
Tax-deductible contributions Yes — State, federal and FICA tax deductible for employers and members1 Yes — State, federal and FICA tax deductible for employers Yes — State, federal and FICA tax deductible for employers and members3
Adjust contribution amount Only during annual enrollment (or with qualifying life event) Employer chooses at beginning of plan year At any time
Tax-free distribution Yes Yes Yes3
Debit card Yes; availability varies by plan Yes; availability varies by plan Yes; availability varies by plan
Can members invest? No No Yes
Tax-free earnings No No Yes
Long-term savings No No Yes
Do funds expire? Yes Yes Never
Account carryover Varies by plan No Yes — even if you change health plans or employers or retire
2021 contribution limits $2,750
(Individual or family coverage)		 Varies by plan type $3,600 (Individual coverage) $7,200 (Family coverage)

What are health FSAs, HRAs and HSAs?

Health FSAs are available only through employers that offer them. You will be asked at open enrollment to determine how much money you want to put in your FSA, and your employer will deduct that amount in pretax dollars from your paycheck.

Contribute only what you think you will spend on qualified expenses for one year, because any leftover amount in your health FSA will be forfeited at the start of the new year. You can decide how much to put in for the following year during open enrollment. Different employers have different open enrollment periods, so check with your human resources or benefits department to find out when yours is scheduled. You cannot take the FSA with you if you leave your employer.

Typically, your employer’s FSA administrator will send you a debit card that you can use to spend your funds. If you need to, you can spend your whole contribution amount on one qualified expense, or you can use it throughout the year to pay doctor’s copays and purchase prescriptions and other authorized items. 

Review IRS publication 502 to see what generally qualifies as a health care expense for an FSA.

HRAs are available only through employers. HRAs are not paid for by you (the member); instead, your employer will work with an HRA administrator and decide how much money to contribute.

Your employer will also decide which eligible out-of-pocket costs (e.g., deductible expenses) the HRA pays for. You may receive a check that you can use to pay a provider’s bill, or the HRA administrator may pay the provider directly. Your employer will decide whether any unused funds can carry over from one year to the next, and if so, how much. Typically, you cannot take HRA funds with you if you leave your employer.

HSAs are available to eligible members enrolled in a qualified high-deductible health plan, such as the Best Buy HSA HMO or Best Buy HSA PPO. You do not need to be covered through an employer to have an HSA; you may be eligible if you bought a qualified high-deductible health plan on your own.

You can contribute to an HSA through pretax payroll deductions or with other personal funds. Your employer may choose to contribute once a year, as well. Unlike a health FSA, leftover amounts roll over from year to year, and the HSA is yours to keep if you leave your employer.

If you contribute to an HSA through payroll deductions, keep in mind that you can spend only up to your account balance at any given time. If you have a large qualified expense early in the year, you may want to pay the provider some other way and then pay yourself back once you have enough funds in your HSA.

FSA and HSA calculators

Use the tools below — provided by FSA and HSA vendors — to help you estimate how much money to contribute to your FSA or HSA account.

Benefit Strategies FSA Calculator

Benefit Strategies HSA Calculator

HealthEquity HSA Calculator

Disclosures

1 FSAs are never taxed at a federal income tax level when used appropriately for qualified medical expenses. Also, most states recognize FSA funds as tax deductible, with very few exceptions. Please consult a tax advisor regarding your state’s specific rules.

2 In addition to restrictions imposed by law, your employer may limit what expenses are eligible for reimbursements. It is your responsibility to ensure eligibility requirements are met, as well as to ascertain that you are eligible for the plan and expenses submitted.

3 HSAs are never taxed at a federal income tax level when used appropriately for qualified medical expenses. Also, most states recognize HSA funds as tax deductible, with very few exceptions. Please consult a tax advisor regarding your state’s specific rules.