Reimbursement Account Comparison

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.

Generally, an employee must be enrolled in a health plan sponsored by the employer to be eligible for an HRA. Small employers may offer an HRA in place of health insurance.*

*Subject to restrictions.

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 by the IRS at $3,300 per employee beginning January 1, 2025.
DCA: capped at $5,000 or $2,500 for a married person filing single.

*Please note amounts can be different if changed as a result of an “Act” and may have to be elected by your employer.

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. In 2024, the individual contribution limit is $4,300 and the family contribution limit is $8,550.

Qualified expenses

Unreimbursed medical expenses as defined in section 213(d) of IRC, except for health insurance premiums (i.e. copays, dental, vision, over-the-counter products, 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) of IRC, and may include retiree health insurance premiums, depending on restrictions outlined in the employer plan 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

No other reimbursement accounts are eligible to be rolled over into this benefit.

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).

Fund carryover

Up to $640 may be carried over from year to year if elected by the employer (the FSA cannot have a grace period and include a carryover).

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.