Health savings accounts (HSAs), health reimbursement accounts (HRAs) and flexible spending accounts (FSAs) all offer ways to pay for health care expenses while saving on taxes, but there are some big differences between how the accounts work. Learn more in the comparison below.
| Health Savings Account | Health Care FSA | Dependent Care FSA | |
|---|---|---|---|
| What does it stand for? | Health Savings Account | Health Care Flexible Spending Account | Dependent Care Flexible Spending Account |
| Who owns it? | Employee | Employer | Employer |
| Who funds the account? |
|
By employee. Employee contributions: $3,050/participant |
By employee. $5,000/per household or $2,500 if married filing separately. |
| What type of corresponding health plan is allowed? | This health savings account is ONLY available with enrollment in the High Deductible Health Plan. | A healthcare FSA is compatible with the Triple Choice Plan. If enrolled in the High Deductible Health Plan, a limited Healthcare FSA is available only for expenses related to dental, vision or out-of-network preventative care services. | A dependent care FSA is compatible with any type of health plan coverage. |
| Can unused amounts carry over? | Yes. The individual owns the account and any contributions made to it, regardless of the source or timing of the contribution. You keep your HSA even if you leave the university. | Yes, by plan design, a plan may allow up to $640 to carry forward. Any remaining balance at the end of the plan year is forfeited. | There is a 2.5 month grace period. Contributions in a calendar year can be applied to expenses incurred through March 15 of the following year. |
| Is the account portable between employers? | Yes. The individual owns the account. | No. FSAs cannot be rolled over to a new employer. | No. FSAs cannot be rolled over to a new employer. |
| How is it funded? | Money is deposited directly into the account. Contributions can be made by employee or other person on an “after tax” basis, by employer or through pre-tax salary deduction. | Based on the employee’s annual election, the employer designates a specific amount of wages to be deducted from the employee’s payroll check pre-tax. | Based on the employee’s annual election, the employer designates a specific amount of wages to be deducted from the employee’s payroll check pre-tax. |
| What is the contribution amount? | Annual contribution limits are established by the IRS and indexed for inflation. Please refer to the IRS Contribution/Deductible Guidelines sheet for specifics. | The annual maximum amount of employee contribution is established by the IRS. This is subject to change annually with IRS Cost Of Living Adjustments (COLA). | The annual maximum amount of employee contribution is established by the IRS. This is subject to change annually with IRS Cost Of Living Adjustments (COLA). |
| Can the contribution amount be changed? | Yes, an HSA contribution can be changed at any time using the HSA Voluntary Contribution Designation Form or during open enrollment | No, an annual healthcare FSA pledge can only be changed if you experience a qualifying life event. You must re-enroll in the plan each year during open enrollment. | No, an annual dependent care FSA pledge can only be changed if you experience a qualifying life event. You must re-enroll in the plan each year during open enrollment. |
| Can the account be funded with pre-tax salary deduction? | Yes. | Yes. | Yes. |
| What are the tax benefits for employees? | Contributions are tax deductible, interest and capital gains on investments are tax-free. Withdrawals for qualified medical expenses are tax-free, although state taxes may apply. |
Employee contributions are exempt from federal and FICA tax as well as most state and local tax. Reimbursements are tax-free. |
Employee contributions are exempt from federal and FICA tax as well as most state and local tax. Reimbursements are tax-free. |
| What health care expenses can be paid from the account? | Funds can be used for any qualified medical expense as defined under Section 213(d) of the Internal Revenue Code (IRC), except for health insurance premiums, with specific exceptions. |
Funds can be used for eligible health care expenses as defined under Section 213(d) of the IRC except for health insurance premiums. |
Funds can be used for eligible dependent care expenses such as:
|
| Must a health care expense be incurred during the plan year the contribution is made? | No. Expenses are eligible for reimbursement once an HSA is established. | Yes, if the plan does not have a grace period or carryover feature. | Yes, if the plan does not have a grace period or carryover feature. |
| Is the annual amount of the contribution available on the first day of coverage? | Only the amount currently available in the HSA may be used to pay or reimburse qualified expenses. | Yes. The total amount elected by the employee for the plan year must be available on the first day, regardless of the amount contributed. | Yes. The total amount elected by the employee for the plan year must be available on the first day, regardless of the amount contributed. |
The University of Arizona established a Health Reimbursement Arrangement (HRA) to assist university employees with out-of-pocket expenses related to gender-affirming surgery and fertility treatments excluded by state health plans. HRAs are employer-funded health benefits that reimburse employees tax-free for certain healthcare expenses.
Content sources from OptumBank