HRA and HSA Comparison Chart, Definitions

HRA and HSA Comparison



Acronym Stands For Health Reimbursement
Health Savings Account
Definition An employer funded medical expense reimbursement plan for qualifying medical expenses. An employer and/or employee funded account in the employee’s name for current and future medical expenses (requires a high deductible health plan and a qualified trustee or custodian).
Establishment of Account Employer Individual or Employer
High Deductible Health Plan (HDHP) Required? No Yes, as defined by the U.S. Department of the Treasury
(see other side for details)
Eligibility Employee who meets employer’s established
eligible class
Employee who meets employer’s established eligible class and is covered by a qualified HDHP. Participants can be covered by other plans such as dental, vision, disability, and/or life, but they cannot be covered by any other plan that covers the same services as the qualified HDHP (that is, no other medical or drug coverage—including Medicare and some FSA programs).
Funding Employer only
Note: Contributions for those enrolled in Medicare may be made.
  • Individual
  • Employee salary reduction dollars
  • Employer

Note: Contributions are not allowed by, or for those
enrolled in, Medicare.

Is Carryover of Unused Funds Allowed? If specified in the HRA plan document. Yes
Taxation of Contributions Not subject to federal or state income or social security/Medicare taxes
  • Employer contribution is excluded from employee income
  • Employer contribution is not subject to federal or state income or social security/Medicare taxes
  • Personal contributions are deductible from federal and state income taxes
  • Excess contributions are subject to tax surcharge
Taxation of Asset Earnings (assuming assets invested) Tax-free, if held in a
tax-exempt trust
Tax-free/deferred compensation withdrawals for non-qualified medical expenses result in federal and state income tax, plus an excise tax, if before age 65
Qualified Medical Expense Defined in Internal Revenue Code (IRC) 213(d) Defined in Internal Revenue Code (IRC) 213(d)
Annual Maximum Contribution No limit established by law
  • Individuals who are eligible individuals on the first day of the last month of the taxable year (December for most taxpayers) are allowed the full annual contribution (plus catch-up contribution, if 55 or older by year end), regardless of the number of months the individual was eligible in the year.
  • For individuals who are no longer eligible on that date, both the HSA contribution and catch-up contribution apply pro rata based on the number of months of the year a taxpayer is an eligible individual.
  • Contributions must stop once an individual is enrolled in any type of Medicare.
Substantiation of Medical Expenses Required on every claim Required, upon audit—a 20% tax penalty to individuals for non-qualified expenses
Responsible Party to Ensure Expenses are Qualified Employer Individual
Banking requirement Typically managed and administered by third party Third Party Trustee
Portability If specified in the HRA plan document. Account is Portable