Understanding the Difference Between HRA vs. HSA | HSA Awareness Blog

When it comes to navigating healthcare options, understanding the difference between HRA (Health Reimbursement Account) and HSA (Health Savings Account) is key. Both are tools that can help individuals cover medical expenses, but they have unique features that set them apart.

Let's break down the main differences between HRA and HSA:

HRA (Health Reimbursement Account)

• HRA is funded solely by the employer.
• Employees cannot contribute to an HRA.
• Unused funds in an HRA may or may not roll over from year to year, depending on the employer's policies.
• Reimbursements from an HRA are tax-free.

HSA (Health Savings Account)

• HSA is funded by the individual, employer, or both.
• Employees can contribute to an HSA, and the funds belong to the individual even if they change jobs.
• Unused funds in an HSA roll over from year to year, allowing for potential long-term growth.
• Contributions to an HSA are tax-deductible, and withdrawals for qualified medical expenses are tax-free.

Choosing between an HRA and HSA depends on factors like your healthcare needs, financial goals, and employer offerings. Consulting with a financial advisor or HR representative can help you make an informed decision.

Understanding the distinction between HRA (Health Reimbursement Account) and HSA (Health Savings Account) can empower you to maximize your healthcare savings. While both accounts serve to assist with medical expenses, their funding structures and benefits vary significantly.