Reimbursement Account Administration

Health Reimbursement Accounts (HRA) are employer funded accounts as defined by section 105 and 106 of the Internal Revenue Code that reimburse employees for qualified medical expenses. The accounts allow the employee an opportunity to make choices on how their healthcare benefit is used. Funds in the account can be used to cover deductible or coinsurance amounts, co-payments and services or supplies that may not be covered by the health plan.

Employees can enjoy first dollar benefits on many medical expenses that would otherwise be an out-of-pocket cost. Contributions are excluded from gross income, providing tax incentive as well. The participant now has more choices and control over how healthcare dollars are spent; either using the money as expenses are incurred, or leaving funds in the account for future use. Unlike flexible spending accounts, the balance is rolled over each year with no requirement that you spend the full amount deposited annually.

Health Savings Accounts (HSA) are offered in conjunction with a high deductible major medical plan. Individuals may contribute up to $2900 or up to $5800 for families each year. These contributions can be used to cover the high deductible, any co-payments and services not covered through the health plan. Premiums for long term care coverage are also qualified expenses. If the employer offers a cafeteria plan, contributions can be made through that plan and are pre-tax transactions.

Unlike flexible spending plans where contributions not used within a year are lost, the balance in an HSA can be rolled over for future use. Distributions are also tax free but penalties apply if funds are withdrawn for purposes other than healthcare expenses. The account holder determines the type of account and can even invest in mutual funds for added growth. An HSA belongs to the employee so it moves with him if he changes employment.

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Flexible Spending Account
A Flexible Spending Account (FSA) is a pre-tax benefit allowed under Internal Revenue Code Section 125 that offers employees the opportunity to set aside pre-tax dollars to use for non-reimbursed medical, dental and dependent care expenses. Insurance premiums, deductibles, co-payments and non-covered services are some of the items that would qualify for FSA reimbursement. Flexible Spending Accounts offer a means of saving tax dollars while enjoying the benefit of being reimbursed for otherwise non-covered expenses.

Increased take home pay. FSA deductions come out of your paycheck before taxes so for tax purposes your pay has been reduced, resulting in an increased take home amount.

Click here for a chart comparing HSA’s, HRA’s and FSA’s.