Reimbursement Account Basics
What are health FSAs, HRAs and HSAs?
FSAs, HRAs, and HSAs are all types of reimbursement accounts to help pay for your health care expenses. FSAs and HRAs are available through employer-paid plans, and HSAs are available to members with qualified (employer or individual) plans. Here you’ll find some general information about the accounts, how they work and how they differ. The Internal Revenue Service has important eligibility rules and contribution limits for each account.
Health FSA (flexible spending account)
Health FSAs are available only through employers that offer them. You will be asked at open enrollment to determine how much money you want to put in your FSA, and your employer will deduct that amount in pre-tax dollars from your paycheck.
Contribute only what you think you will spend on qualified expenses for one year, because any leftover amount in your health FSA will be forfeited at the start of the new year. You can decide how much to put in for the following year during open enrollment. Different employers have different open enrollment periods, so check with your human resources or benefits department to find out when yours is scheduled. You cannot take the FSA with you if you leave your employer.
Typically, your employer’s FSA administrator will send you a debit card that you can use to spend your funds. If you need to, you can spend your whole contribution amount on one qualified expense, or you can use it throughout the year to pay doctor’s copays and purchase prescriptions and other authorized items.
Review IRS publication 502 to see what generally qualifies as a health care expense for an FSA.
HRA (health reimbursement arrangement)
HRAs are available only through employers. HRAs are not paid for by you (the member), but instead your employer will work with an HRA administrator and decide how much money to contribute.
Your employer will also decide which eligible out-of-pocket costs (e.g., deductible expenses) the HRA pays for. You may receive a check that you can use to pay a provider’s bill, or the HRA administrator may pay the provider directly. Your employer will decide whether any unused funds can carry over from one year to the next, and if so, how much. Typically, you cannot take HRA funds with you if you leave your employer.
HSA (health savings account)
HSAs are available to eligible members enrolled in a qualified high-deductible health plan, such as the Best Buy HSA HMO or Best Buy HSA PPO. You do not need to be covered through an employer to have an HSA; you may be eligible if you bought a qualified high-deductible health plan on your own.
You can contribute to an HSA through pre-tax payroll deductions or with other personal funds. Your employer may choose to contribute once a year, as well. Unlike a health FSA, leftover amounts roll over from year to year, and the HSA is yours to keep if you leave your employer.
If you contribute to an HSA through payroll deductions, keep in mind that you can spend only up to your account balance at any given time. If you have a large qualified expense early in the year, you may want to pay the provider some other way and then pay yourself back once you have enough funds in your HSA.