HRA vs. HSA: What You Need to Know

February 15, 2018

Are you looking for ways to help your employees save money on healthcare costs? Offering consumer-directed benefits plans, such as a Health Reimbursement Arrangement (HRA) or Health Savings Account (HSA), are great tools for both you and your employees to save money, and for your employees to prepare for potential medical expenses.

For employers, offering HRAs or HSAs comes with perks, including tax savings and increased employee retention. We’ve outlined the key differences between the two types of accounts below so you can see how they work, the advantages to each, and if you should be offering one or both to your employees. 


Health Reimbursement Arrangement

An health reimbursement arrangement is an employer-funded benefits plan that employees use to save pre-tax dollars on medical costs. HRAs provide flexibility for employers and employees because:

  • Employers design their HRAs to work with any health plan. You can customize your HRA, determining how much you want to contribute to it, what expenses are eligible and whether or not funds can roll over to the next plan year.
  • Employees are able to pair a health reimbursement arrangement with any group health plan. Those enrolled in a Medical Flexible Spending Account (FSA) may also be able to enroll in certain types of HRAs.

We support flexible plan designs, empowering you to determine your own benefits goals for your participants by letting you set up your HRA to look however you want.

Health Savings Account

An HSA is an individually owned medical savings account funded by either you or the employee. The funds set aside can be used for qualified expenses. HSAs have a triple-tax advantage, as distributions for qualified medical expenses and investment returns are tax-free, and contributions are tax-deductible.

If you offer an HSA, you’ll save money on your payroll tax bill, while employees see financial gains in a number of ways, including:

  • Lower insurance premiums, as employees must be enrolled in a High-Deductible Health Plan to be an eligible.
  • Investment potential; HSA funds can be invested in mutual funds, like you would with a 401(k), which lets employees grow their dollars.

Our HSA comes with a low-investment threshold, and our integrated investment experience through your employees’ online accounts make it easy for participants to make the most of their funds. Those are just a couple of the reasons why we’ve taken the lead in HSA growth, adding a greater percentage of HSA assets over the last year than any other provider.

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