Employee Benefits
HRA vs. HSA: How Are They Different?
Looking for a way to save money on medical expenses? Pre-tax savings and spending accounts, like health reimbursement arrangements (HRAs) and health savings accounts (HSAs), can help.
Both types of accounts can help an employee pay for medical care, but there are some key differences. For example, you can take your HSA funds with you when you leave your job, but that option generally isn’t available for HRAs.
Here are important details to know about HRAs vs. HSAs.
Key differences between an HRA and an HSA
| HRA | HSA | |
| Who’s eligible? | Employees whose employers offer HRAs and who can meet employer-specific eligibility requirements | Individuals with an HDHP who can meet all IRS-specific eligibility requirements |
| Who owns the account? | Employers | Individuals account holders |
| Who can contribute? | Only employers | Both individuals and employers, as well as spouses and family members of the account holder |
| What is the maximum contribution amount? | There are no maximum annual contribution limits for standard HRAs and ICHRAs, but QSEHRAs and EBHRAs have annual limits set by the IRS.1 | Set by the IRS, $4,150 for individuals and $8,300 for families in 20242 |
| Does it earn interest? | No | Yes |
| Does the money roll over year-to-year? | Typically no, but an employer may allow it | Yes |
| Is the account portable if you change jobs? | Typically no, but an employer may allow you to use the remaining funds | Yes |
What to know about HRAs
An HRA is a type of account that provides tax-free money to pay for qualified healthcare. HRAs are employer-funded plans and are offered as part of an employer-sponsored group health insurance plan. Only an employer can put money into an HRA, and employers set contribution and rollover limits. Employees typically lose these funds if they leave the company.
Contributions to an HRA aren’t taxed, and employees can only withdraw the money for qualified health-related expenses. Depending on the employer, some HRAs can also be used to reimburse health, vision, and dental insurance premiums.
There are several types of HRAs an employer might offer its employees. Some of the most common include:
- Standard HRA: This is a traditional HRA in which an employer provides a tax-advantaged reimbursement plan that employees can use toward qualified medical expenses.
- Individual coverage HRA (ICHRA): This is a new type of HRA that became available in January 2020.3 Employers can offer this plan as an alternative to traditional group health insurance. To participate, employees must enroll in individual health insurance coverage through the private marketplace.
- Qualified small employer HRA (QSEHRA): This type of HRA is for small businesses that want to offer their employees a tax-free reimbursement for qualifying health expenses.
- Expected benefit HRA (EBHRA): This type of HRA is offered to all employees, even if they don’t participate in the company’s group health coverage. This plan can be used for out-of-pocket expenses related to vision and dental costs, short-term disability insurance, and other qualified medical expenses.
Benefits of an HRA
Some advantages of an HRA include:
- Employers contribute money that can be used to help cover qualified health costs.
- The money contributed to an HRA isn’t considered taxable income.
What to know about HSAs
An HSA — not to be confused with a flexible spending account (FSA) — is a pre-tax account designed to help save on out-of-pocket qualified medical expenses. To qualify for an HSA, account holders must be enrolled in a high-deductible health plan (HDHP). Both an employer and employee can contribute to the account.
Contributions are limited to an annual maximum dictated by the government. The funds saved in an HSA are portable — meaning you take them with you if you retire or leave your job. They also carry over into the next year.
Employers who offer HDHPs might offer HSAs as part of their employee benefits package. However, individuals can also purchase their own HSA in the private marketplace. Employed, self-employed, and unemployed individuals can all contribute to an HSA, as long as they meet the following eligibility requirements:
- You must be covered under an HDHP.
- You can’t have coverage under any other type of health plan.
- You can’t be enrolled in Medicare.
- You aren’t claimed as a dependent on another person’s tax return.
Benefits of an HSA
Some advantages of an HSA include:
- The money goes with the employee, even if they change employers or retire.
- Any leftover balances automatically roll over to the next year.
- The money contributed to an HSA isn’t considered taxable income.
- Withdrawals aren’t taxed, as long as you use them for qualified expenses.
- The money in an HSA can be invested and grown tax-free.
HRA vs. HSA: Which may be better for you?
To choose between an HRA or HSA, consider your specific needs and circumstances. First, figure out if you meet the basic eligibility requirements, like being enrolled in an HDHP or meeting specific employer mandates.
Consult with your employer to help you weigh all your options.
Learn about MetLife Health Savings & Spending Accounts
1 “Health Reimbursement Arrangements (HRAs): Overview and Related History, March 7, 2022
https://crsreports.congress.gov/product/pdf/R/R47041
2 “26 CFR 601.602: Tax forms and instructions” https://www.irs.gov/pub/irs-drop/rp-23-23.pdf
3 “What's an individual coverage Health Reimbursement Arrangement (HRA)?” HealthCare.gov
4 “Health Savings Accounts and Other Tax-Favored Health Plans” IRS, 2022
5 Nothing in these materials is intended to apply to a particular individual's financial situation.
6 This article is intended to provide general information about insurance. It does not describe any MetLife product or feature.