Health Savings Accounts (HSAs), Health Flexible Spending Accounts (Health FSAs), and Health Reimbursement Arrangements (HRAs) can all provide tax-advantaged ways to pay for eligible health care expenses, but they work very differently.
The key distinctions involve who funds the arrangement, who owns or controls the funds, what health coverage may be required, whether unused amounts can carry forward, and what happens when employment ends.
At a high level:
HSA – Save it. An individually owned account that can be used for current expenses or saved for future health care costs. Contributions can be made while an individual has qualifying medical coverage, usually a High Deductible Health Plan (HDHP), and accumulated funds can be used at any time for eligible expenses incurred after the HSA was established.
Health FSA – Spend it. An employer-sponsored benefit through which employees generally make pre-tax payroll deduction elections for anticipated health care expenses. Employers may also contribute, depending on the plan design.
HRA – Reimburse it. An employer-funded arrangement used to reimburse employees for eligible expenses according to the employer’s plan design. HRAs come in several forms and are not all subject to the same rules.
This page provides a high-level comparison of HSAs, Health FSAs, and HRAs generally. For more detail about Individual Coverage HRAs (ICHRAs/CHOICE Arrangements), QSEHRAs, and how different HRA designs compare, see our dedicated ICHRA and HRA comparison resources in the Compliance Wiki.
The chart below compares the major features of each arrangement and highlights some of the rules that most commonly cause confusion.
| Feature | HSA | Health FSA | HRA |
|---|---|---|---|
| What is it? | An individual tax-advantaged savings account used to pay or save for qualified medical expenses. | An employer-sponsored benefit that allows employees to set aside pre-tax dollars for eligible health care expenses. | An employer-funded reimbursement arrangement used to reimburse employees for eligible health care expenses on a tax-advantaged basis. |
| Who establishes it? | An HSA is established in the account holder's name with an HSA trustee or custodian. It may be offered through an employer or opened individually through a bank or other HSA provider. | Employer | Employer |
| Who can put money into it? | The account holder, employer, or others may contribute, subject to HSA eligibility and annual contribution limits. | Employees may make pre-tax salary-reduction contributions. Employers may also contribute, subject to applicable FSA contribution rules and limits. | Employer only. The HRA is established and funded entirely by the employer. |
| Who can participate? | Generally, an individual must have HSA-qualified coverage (High Deductible Health Plan - HDHP) and cannot have disqualifying other coverage. Beginning January 1, 2026, qualifying Bronze and Catastrophic individual-market plans are also treated as HSA-compatible. | Eligible employees under the employer's plan. No particular type of medical plan generally must be elected to participate. | Eligible employees under the employer's HRA plan. Eligibility and any health-plan requirements depend on the HRA's design, which the employer has much discretion over. |
| Whose money is it? | The account holder's. The HSA belongs to the individual, usually the employee. | Employee elections become part of the employer-sponsored FSA plan. The employee does not own a separate bank account containing the elected amount. | An HRA is an employer-funded reimbursement mechanism. The employer makes specified amounts available to reimburse eligible employee expenses under the terms of the plan. |
| What happens to unused money? | It stays in the HSA indefinitely. There is no use-it-or-lose-it rule. | Health FSAs are generally subject to use-it-or-lose-it rules. At the employer's discretion, the plan may permit an annually indexed carryover amount or a grace period of up to 2½ months to incur new eligible expenses. | Depends on plan design. The employer may permit unused reimbursement amounts to carry forward for future eligible expenses. |
| Does it stay with the employee after employment ends? | Yes. The HSA remains the account holder's. | Generally no, subject to applicable plan and continuation rules. | Generally no, although certain HRA designs may permit reimbursement after termination. |
| Is a particular type of medical coverage required? | Yes. HSA eligibility rules apply. Traditionally this means HSA-qualified HDHP coverage; beginning in 2026, qualifying individual-market Bronze and Catastrophic coverage is also treated as HSA-compatible. | No specific health plan election is generally required. However, participation in a general-purpose health FSA can make an individual ineligible to contribute to an HSA. | Depends on the type of HRA. Traditional integrated HRAs are generally offered in conjunction with employer group medical coverage, often to help employees with expenses under a higher-deductible plan. Other HRA types have their own coverage requirements. |
| Can it coordinate with an HSA? | — | A general-purpose health FSA generally prevents HSA contributions. A limited-purpose FSA that reimburses only permitted expenses, such as dental and vision expenses, may coordinate with an HSA. | Sometimes. HSA compatibility depends on the HRA's design. Certain limited-purpose or post-deductible HRAs can coordinate with an HSA. |
| Is it federally tax-advantaged? | Yes. Eligible contributions receive favorable federal tax treatment; account earnings may grow tax-free; and withdrawals for qualified medical expenses are tax-free. | Employee salary-reduction contributions are generally made pre-tax, and eligible reimbursements are generally received tax-free. | Yes. The employer funds the HRA, and reimbursements of eligible medical expenses are generally excluded from the employee's taxable income. |
| When are funds available? | Only amounts actually contributed to the HSA are available for distribution. | Under the uniform coverage rule, the employee's full annual health FSA election is generally available during the coverage period, even before that amount has been deducted from pay. | Reimbursement is available according to the employer's HRA funding and plan terms. |
| Can it reimburse qualified medical expenses? | Yes | Yes | Yes, subject to the employer's HRA design |
| Can it reimburse health insurance premiums? | Generally no, but HSAs may pay certain premiums tax-free, including COBRA premiums and certain Medicare premiums. | No | A traditional HRA generally cannot be used to reimburse individual-market premiums. Premium reimbursement is permitted through specific HRA arrangements such as an ICHRA/CHOICE Arrangement or QSEHRA, subject to their rules. |
| Can money be used for non-medical expenses? | Yes, but the distribution is generally taxable and may also be subject to an additional tax. | No | No |
| Is there a federal annual contribution limit? | Yes. IRS limits apply and are adjusted periodically, usually annually. | Yes. An IRS limit applies to employee health FSA salary-reduction contributions and is indexed periodically. However, employers may establish limits lower than the IRS limit. | A traditional HRA generally does not have a universal federal contribution limit, although certain types of HRAs (Ex: QSEHRAs) do. |
| Who controls the design? | HSA eligibility and tax rules are set by federal law. An employer may determine whether and how much it contributes, but the HSA belongs to the account holder. | Employer. The employer establishes the plan within applicable federal Section 125 rules. | Employer. The employer determines eligibility, reimbursement amounts, eligible expenses, carryover provisions and other plan features within applicable rules. |
| Biggest thing to remember | The employee owns it, and it is designed for both current spending and long-term savings. | The employee elects it - and payroll dollars - for anticipated spending, but it is part of the employer's plan rather than an employee-owned account. | The employer funds and designs it as a mechanism for reimbursing eligible expenses. |