Understanding the Difference Between HSA and HRA for Health Savings

Health Savings Accounts (HSAs) and Health Reimbursement Arrangements (HRAs) are both tools that can help you save for medical expenses, but they have some key differences.

An HSA is a savings account that allows you to set aside pre-tax money to pay for qualified medical expenses. Contributions to an HSA roll over from year to year, and the account is yours to keep even if you change jobs or retire. You can invest the money in your HSA, and any earnings are also tax-free if used for medical expenses.

On the other hand, an HRA is an employer-funded account that reimburses you for medical expenses. Unlike an HSA, the HRA is owned and funded by your employer, and any unused funds typically do not roll over from year to year.

Here are some key differences between HSA and HRA:

• HSA is individually owned, while HRA is typically owned by the employer.
• HSA contributions can be made by both the individual and the employer, whereas HRA contributions are made solely by the employer.
• HSA funds belong to the individual and roll over from year to year, but HRA funds are typically used within the plan year and do not roll over.
• HSA funds can be invested to potentially grow over time, while HRA funds do not earn interest or investment returns.

Understanding the differences between Health Savings Accounts (HSAs) and Health Reimbursement Arrangements (HRAs) is crucial for making the best decisions about your healthcare benefits.