Offering benefits that help employees manage healthcare expenses is a key part of any competitive benefits package. Three popular tools—Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and Health Reimbursement Arrangements (HRAs)—allow employers to support their teams while offering tax advantages for both the business and the employee.
What’s the Difference?
Here’s a high-level overview of each:
HSA (Health Savings Account)
- Must be paired with a high-deductible health plan (HDHP)
- Owned by the employee and portable
- Contributions are pre-tax and can be invested
- Funds roll over year to year
FSA (Flexible Spending Account)
- Funded by employee or employer, or both
- Contributions are pre-tax
- Funds typically must be used in the same plan year (some plans offer grace periods or limited rollover)
- Not tied to a specific plan type
HRA (Health Reimbursement Arrangement)
- Funded entirely by the employer
- Reimburses employees for eligible medical expenses
- Can be designed with flexibility—such as covering deductibles, co-pays, or premiums
Which One Is Right for Your Business?
Each option serves a different purpose. HSAs are ideal for employees comfortable with a high-deductible plan and who want to build long-term healthcare savings. FSAs are more flexible and can be a great option for families with predictable annual healthcare costs. HRAs are best when the employer wants full control and flexibility over what’s reimbursed.
At Rice Insurance Benefits, we help employers in California evaluate which mix of plans aligns with their budget, goals, and workforce needs.
Tax Advantages for Everyone
- Employers save on payroll taxes with HSA and FSA contributions.
- Employees lower their taxable income.
- HRAs give employers a write-off for reimbursements made.
Want help designing the right plan for your team?
Contact Rice Insurance Benefits today. I’m happy to answer any questions you may have.
