R&K Blog
Most employers offer CDHPs in conjunction with a healthcare account. These accounts take two forms: a health savings account (HSA), which is opened by the employee and can be funded by both the employer and the employee, or a health reimbursement arrangement (HRA), which is owned and funded only by the employer.
Both HSAs and HRAs are tax-advantaged. For HRAs, employer contributions do not have to be included in the employee’s gross salary; therefore, contributions are not taxed. For HSAs, the amount the employee contributes is tax-deductible and not included in the employee’s gross wages. Furthermore, interest earned in an HSA account is not taxable. Unspent funds in both types of accounts can be rolled over from year to year. Most employers do not make HRA accounts portable; however, individuals participating in HSAs may retain their accounts if they leave their employers.
Although both types of accounts are still offered, HSAs seem to be edging out HRAs in terms of popularity. Issues such as portability, ownership and contribution flexibility can all be cited as possible reasons for this shift.
In previous blog posts, we’ve gone into more depth on HSAs and also compared flexible spending accounts (FSAs) with HSAs to see how they are similar and different. Later on, this year, we’ll go over the different annual contribution maximums, determined by the Internal Revenue Service (IRS) for each calendar year, when available. Overall, offering these tools and support to employees to help manage these funds can help empower them to become better healthcare consumers.
To help determine if an FSA, HRA or an HSA is the right option for you or for further clarification on how much you may save in taxes, contact Rose & Kiernan, Inc. here or by calling (800) 242-4433. Advice given in this article is for information purposes only and are not intended to replace the advice of an insurance professional.