HRA/HSA Comparison

What does it stand for? Health Reimbursement Arrangement Health Savings Account
Who “owns” it? Employer Employee
Who funds it? Employer Only Employer and/or Employee
How is it funded? Employer reimburses employee when presented with valid receipt Pre-determined amount set aside pre-tax in an account then a receipt is submitted by the employee & is reimbursed by a legally qualified administrator
Are there insurance plan requirements? No Yes. HSA qualified High Deductible Health Plan (HDHP) 2010 Deductible Minimums: $1,200 Individual / $2,400 Family
2010 Maximum Annual Contribution None $3,050 Individual / $6,150 Family
Is it a personal Account? It is an arrangement not an account Yes and earns tax free interest
Are Funds immediately available? As funds are credited; may be credited in a lump sum As deposits are credited
Qualified Medical Expenses Generally those defined in Section 213(d) of IRC not covered elsewhere
Are distributions for non-medical expenses allowed? No Yes
Is usage for ineligible expenses allowed? No Yes. Amounts will be included in gross income and subject to 10% penalty, except for those over 65, deceased or disabled
Does the unused money carry over? At employers discretion Yes
Is the account portable? No. The money belongs to the employer. Yes. It is a personal account the money belongs to the employee
What are the tax benefits? The employer may deduct all qualified reimbursements as business expenses. The employee does not have to claim the reimbursement as income so the money is given to them tax free The employer may deduct all qualified employer contributions as business expenses. The employee money is deposited in an account pre-tax through Section 125 plan and can be withdrawn with no tax penalty to pay for qualified expenses.
Are dependent care expenses eligible? No No
Does COBRA apply? Yes No