Reimbursement Account Comparison

  FSA and DCA HRA HSA*
Overview 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 None. None. 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.
Contribution limits 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.
Qualified expenses 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 None allowed. 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.)
Fund carryover 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.
Portability 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.
Interest accrual 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.

*While not offered directly through Nova, we partner with several financial institutions to provide HSA options.