An HRA (Health Reimbursement Arrangement) and an HSA (Health Savings Account) are two types of popular healthcare savings/reimbursement accounts that help offset healthcare expenses. Here are the key differences between the two:
Ownership:
- An employer owns an HRA, while an HSA is owned by the individual.
Funding:
- An HRA is funded by the employer, while an HSA can be funded by either an employer, an employee, or a self-employed worker.
Portability:
- An HSA belongs to the employee and can move from job to job, while an HRA is in effect only as long as the person is employed by the company.
Accumulation:
- HRAs do not accumulate funds unless otherwise specified by the employer, while HSAs can accumulate funds that can be invested until needed for qualified expenses, and interest earned is tax-free.
Eligibility:
- To qualify for an HSA, account holders must be enrolled in a high deductible health plan (HDHP), while there are no such requirements for an HRA.
Both HRAs and HSAs can help employees afford medical care and minimize the burden on the employer for costs. Additionally, they both offer tax benefits related to healthcare costs. When choosing between an HRA and HSA, it is important to consider your specific needs and circumstances, such as eligibility requirements, funding options, and portability.
