Comparison of Consumer Directed Health Care
(CDHC) Accounts
| Flexible Spending Account(FSA) | Health Reimbursement Arrangement(HRA) | Health Savings Account(HSA) |
| Overview | ||
| A tax-advantaged account that allows employees to pay for qualified medical expenses as established by an employer’s cafeteria plan (Section 125). | An employer-owned and funded reimbursement account that allows employees to pay for certain services as determined by the plan document. | A tax-advantaged savings account, available to all taxpayers with a qualified High Deductible Health Plan (HDHP) that allows individuals to pay for qualified medical expenses as determined by the US Department of the Treasury. |
| Eligibility | ||
| Employee who meets the employer’s eligibility criteria. | Employee who meets the employer’s eligibility criteria. | Eligible individual or employee covered by an HDHP. |
| Account Owner | ||
| Employer | Employer | Employee |
| Earns Interest | ||
| No | Employer may apply a notional interest credit | Yes |
| Account Profitability | ||
| No | No | Yes |
| Contributions | ||
| Employee (payroll deferral) Employer | Employer | Employee (payroll deferral) Employer Employee (direct) |
| Eligible Expenses & Distributions | ||
| IRC §213(d) Qualified medical expenses, as defined in the employer’s plan document. Cannot access for non-medical reasons. | IRC §213(d) Qualified medical expenses; Medicare, health insurance premium (at age 65) and long-term care premiums; COBRA (when unemployed); as defined in the employer’s plan document. Cannot access for non-medical reasons. | IRC §213(d) Qualified medical expenses; Medicare health insurance premium (at age 65) and long-term care premiums; COBRA (when unemployed). May withdraw at any time for any reason (subject to income taxes and 20 percent penalty). May use the funds to pay for self, spouse and dependent children even if they are not covered by the HDHP. |
| Claims Substantiation | ||
| ERISA plan – Employer or administrator must substantiate expenses. | ERISA plan – Employer or administrator must substantiate expenses. | Only the employee is required to maintain documentation. Employer and administrator need not review. |
| Rollover of Unused Funds | ||
|
Grace Period or Limited Rollover options. Employer can make a choice as to whether to allow employees a 2-1/2 month annual grace period after year end to use remaining funds or to allow an employee to rollover a limited amount up to $500 each year. An employer can only pick one option to offer to employees. |
Yes. Most employers allow some portion of the balance to roll over from year to year; however it is generally forfeited upon termination. Rollover rules must be outlined in the plan document. | Yes. Individuals may use current year’s contributions for future year’s expenses. The account is non-forfeitable and belongs to the individual for life. |
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