The Health Reimbursement Arrangement and the Health Savings Account are two completely different documents. Here are the key differences between them:
- HRA is funded and managed by the employer. There are no participant contributions.
- HSA is funded and managed by the employer in most instances.
- HSA must be funded before funds can be withdrawn.
- HRA does not need to be fully funded in order to withdraw funds.
- The HSA stays with the individual, regardless of moves or changes to their job.
- The money deposited and withdrawn from the HSA is not taxed.
- After 65, the funds from the HSA can be used for non-medical purposes, but they will be taxed.
- The HSA has an early withdrawal penalty.
- There is no possibility of early withdrawal, or use for non-medical purposes, with the HRA.
- You must be enrolled in a HDHP in order to have an HSA.
- With most HSAs there are investment options. Use your savings to plan for retirement!