Updated: HRAs, HSAs and Health FSAs - What's the Difference?

Posted by Matt Schwartz on Fri, Nov 13, 2020 @ 11:11 AM


10/26/20 Update: Updated for the 2021 EBHRA limit, 2021 Health FSA limit, and 2021 QSE HRA limit. Health reimbursement arrangements (HRAs), health savings accounts (HSAs) and health care flexible spending accounts (HFSAs) are generally referred to as account-based plans.

That is because each participant has his or her own account, at least for bookkeeping purposes. Under the tax rules, amounts may be contributed to these accounts (with certain restrictions) and used for health care on a tax-favored basis.

The Patient Protection and Affordable Care Act (ACA) added new requirements that affect HRAs and HFSAs. HSAs generally are not affected by the ACA.

The 21st Century Cures Act (Cures Act) provided a method for certain small employers to reimburse individual health coverage premiums up to a dollar limit through HRAs called “Qualified Small Employer Health Reimbursement Arrangements” (QSE HRAs). This provision was effective on January 1, 2017.

In June 2019, the Department of the Treasury, Department of Labor, and Department of Health and Human Services issued final rules to expand the use of HRAs by removing the prohibition against integrating an HRA with individual health insurance coverage (individual coverage HRA, or ICHRA) and expanding the definition of limited excepted benefits to recognize certain HRAs as limited excepted benefits if certain conditions are met (excepted benefit HRA, or EBHRA). ICHRAs and EBHRAs will be available starting on January 1, 2020.

Click here to see the chart that describes the main characteristics of these types of accounts, which should help you decide which option is the best for your situation.


  • To qualify as an excepted benefit, an HFSA must be offered in conjunction with a group medical plan and the employer’s contribution cannot exceed two times the employee’s pre-tax contribution to the HFSA plus $500.
  • Beginning in 2014, HRAs must be available only to individuals actually covered by the group medical plan (or the spouse’s group medical plan if the plan provides) (ACA integration requirement). Participants must be given the option to decline further HRA reimbursement annually and when their employment terminates.
    However, starting on January 1, 2020, employers can offer an individual coverage HRA (ICHRA) that would be an exception to the ACA’s integration requirement.

Published 3/24/2017

Updated 5/30/2018

Updated 5/29/2019

Updated 7/23/2019

Updated 10/7/2019

Updated 10/26/2020




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This information is general and is provided for educational purposes only. It reflects UBA's understanding of the available guidance as of the date shown and is subject to change. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.

Topics: Compliance Issues, Affordable Care Act, Employee Benefits