Understanding the Difference Between HRA and HSA

Health reimbursement arrangements (HRAs) and health savings accounts (HSAs) are both valuable tools that help individuals manage their healthcare expenses. However, there are key differences between the two that you should be aware of.

An HRA is an employer-funded account that reimburses employees for qualified medical expenses. On the other hand, an HSA is a savings account that allows individuals to set aside pre-tax money for medical expenses.

One of the main differences between an HRA and an HSA is the ownership of the account. With an HRA, the employer owns and funds the account, while with an HSA, the individual account holder is responsible for contributions and the account belongs to them.

Another crucial difference is the portability of the funds. Funds in an HRA do not typically roll over from year to year and are not portable if you change jobs. Conversely, funds in an HSA rollover from year to year and are portable, allowing you to take the account with you if you switch employers.

When it comes to eligibility, HRAs are only available to employees who are offered the benefit by their employer, whereas HSAs can be opened by anyone who has a high-deductible health plan (HDHP).

Overall, understanding the distinctions between HRAs and HSAs can help you make informed decisions about which option may be the best fit for your healthcare needs.

Understanding the nuances between health reimbursement arrangements (HRAs) and health savings accounts (HSAs) is essential for anyone looking to optimize their healthcare finances. Both options serve to alleviate the burden of medical expenses, but they operate quite differently.