Understanding the Difference Between HRA and HSA Accounts

Health Reimbursement Arrangement (HRA) and Health Savings Account (HSA) are popular options for managing healthcare costs, but they have key differences that can impact your financial wellness. Let's explore the distinction between these two account types.

Health Reimbursement Arrangement (HRA):

• Employer-funded benefit
• Reimburses employees for qualified medical expenses
• Contributions are made solely by the employer
• Unused funds may or may not rollover depending on the plan

Health Savings Account (HSA):

• Individual-owned account
• Contributions can be made by both employer and employee
• Tax-deductible contributions
• Unused funds roll over year after year

While both HRA and HSA offer tax benefits, the key distinction lies in ownership, contribution sources, and rollover policies. Understanding these differences can help you make informed decisions about your healthcare finances.

When navigating your healthcare costs, understanding HRAs and HSAs can empower you to make informed choices. While both serve the purpose of helping with medical expenses, they are structured differently.

An HRA, funded entirely by your employer, allows you to get reimbursed for qualified medical expenses, but keep in mind that if you don’t use these funds by year-end, you may lose them. In contrast, an HSA not only provides you with tax-free savings for medical costs but also allows your contributions to grow and roll over every year, which can be a significant asset in your financial planning.