||FSA: Cafeteria plan account authorized under IRC Section 125 that reimburses for qualified medical expenses defined under Section 213(d).
FSA with Dependent Care Allowance (DCA): Pre-tax dollars to pay for qualified dependent care expenses.
|Employer maintained account that reimburses employees for qualified medical care expenses.
||A tax-exempt trust or custodial account created to pay for qualified medical expenses of the employee and their dependent(s).
|Who is eligible
||Employee whose employer offers an FSA plan.
||Employee whose employer offers an HRA plan.
||Individuals and families who are covered under a high-deductible health plan and no other health plan (with the exception of some permitted insurance such as workers’ comp, property insurance, insurance for hospitalization, accidents, disability, dental, vision or long-term care).
|Health plan requirements
||Qualified high-deductible health plan. Minimum deductibles and maximum out-of-pocket set by the federal government annually.
|Who may contribute
||The employee, employer or both. Typically funded by employees.
||Employer only (subject to non-discrimination requirements).
||Either the employee or the employer (subject to comparability requirements) or both. Individuals who are claimed as a dependent on another person’s tax return or who are Medicare eligible cannot contribute.
||FSA: Employer typically sets limits, however contributions are capped at $2,500 per employee beginning January 1, 2013.
DCA: capped at $5,000 or $2,500 for a married person filing single.
|No federal income tax law limits. Employer defines the amount that will be contributed.
||Up to 100% of the annual maximum amount determined by the federal government.
||Unreimbursed medical expenses as defined in section 213(d) of IRC, except for health insurance premiums (i.e. copays, dental, vision, day care, etc.) Qualified Dependent Care Allowance expenses, such as after- school programs, daycare, pre-school or nursery school programs.
||Unreimbursed medical expenses as defined in Section 213(d) or IRC, and may include retiree health insurance premiums, depending on employer design.
||Unreimbursed medical expenses as defined in Section 213(d) of IRC, except for allowable health insurance premiums (allowable premiums: COBRA, long-term care and insurance while receiving unemployment compensation).
|Rollover from other accounts
||Generally no, except from one HRA to another at the same employer.
||Yes. From another HSA or MSA (does not count toward annual contribution limit). Yes. From an FSA or HRA, one-time, with restrictions and conditions (does not count toward annual contribution limit.)
||No. Unused balances are forfeited to the employer at year-end.
||Yes. Unused balances can be carried over, but subject to employer set limits.
||Yes. Funds can be carried over for the account holder’s lifetime.
||No. Unused balances are forfeited to the employer if the employee leaves or changes jobs.
||Generally no, but an employer may allow balances to be spent down at termination or at retirement.
||Yes. Employees may take funds with them when they leave or change jobs.
||No. Interest is not accrued.
||There is no requirement that interest accrues, but employers have discretion to credit interest to the HRA account.
||Yes. Interest accrues tax-free. May invest in mutual funds, CDs and interest bearing savings accounts, but not in life insurance contracts.