FSAs and HRAs offer tax-free savings that employees can use for eligible medical, vision, and dental expenses. Depending on the type of healthcare plan they offer, which account type employers offer (FSA/HRA) will determine what type of account they offer.
There are limits on the amount of money that can be contributed to HSAs or FSAs each year. Discover more about FSA/HRA claims through online sources.
Good healthcare options are a key component of a competitive benefits package for employees. Many employers offer their employees additional tax-free accounts to help pay for medical expenses.
These accounts include flexible spending accounts (FSA) and HRA (health reimbursement account). These accounts serve similar purposes, but there are some key differences that will help you choose the right one for your company.
The difference between the two accounts:
FSAs and HRAs differ primarily because of their ownership, funding, or requirements. Each account type includes tax-free money but they are subject to different rules in the Internal Revenue Code.
An FSA account is an employer-owned, employee-funded account that employees may use to pay for eligible healthcare costs not covered by other plans. Employers have the option of allowing a specific amount of unused funds to roll over to the next year, or granting a grace period of up to 2.5 months for any unused balance.
An HRA, which is employer-owned and employer-funded, allows employees to use it to pay for eligible healthcare costs not covered by other plans. Employers can contribute as much or as little money each year. They also have the option to allow any unused HRA funds for rollover into the next year.