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What is a Health Reimbursement Arrangement (HRA)?

A Health Reimbursemetn Arrangement (HRA) is an employer sponsored plan that reimburses you  for the healh care costs of you and your family. Your employer  is the only one that can contribute to your HRA.


an HRA is established by your employer , so self employeed are not eligible. There is no requirement to be covered by any other type of health plan so you can enroll in an HRA if it is offered by your employer no matter what other health coverage you have or do not have.


Health Reimbursement Arrangements are solely funded by your employer and your employer can set the maximum coverage amount. employer contributions are tax free income to you. Reimbursements are excluded from your taxable income if  the money was spent on qualified health costs and medical expenses. There may be some exceptions if you are considered a highly compensated employee. Unlike FSA, unses funds in an HRA at the end of the year are not forfeited and can be carried forward

The government offers several programs based on tax breaks that are designed to help you pay for you and your family's medical expenses. The IRS calls them tax favored health plans.You may be able to enroll in a Health Savings Account, a Medical Savings Account, A Flexible Spending Arrangement, and or a Health Reimbursement Arrangement.


What is a Health Savings Account (HSA) ?

A Health Savings Account is a tax exempt account used to pay or reimburse your family's medical expenses if you are covered by a high deductible health insurance plan. You or anyone else can contribute money to your HSA. You can take a tax deduction for money contributed to you HSA by anyone except your employer. The money you take out is tax free if you use it for qualified medical expenses.  You can set up a Health Savings Account through your employer, a bank, an insurance company or another approved trustee. Health Savings Accounts are portable, so you can keep the account even if you change employers. The money in an HSA remains in the account until you spend it.


The requirements to qualify for an HSA are:

  1. You must be covered by a high deducible health plan (HDHP) on the first day of the month
  2. You cannot have any other general health coverage except a high deductible plan ( there are exceptions for specific coverage, such as for vision, dental, disability, or long term insurance
  3. You may not be enrolled in Medicare
  4. You must not be claimed as a dependent on someone's tax return


 For 2014, the contribution limit for Health Savings Accounts is $3,300 for individuals and $6,550 for families (plus $1,000 if you are 55 or older at the end of the year) Since 2013 the contribution limits have been adjusted for inflation. You generally cannot make contributions to an HSA  if you are covered by a Flexible Spending Account or a Health Reimbursement Account.


Your gross distributions from distributions from an HSA are reported to you on Form 1099-SA When you file your tax return, you are required to report HSA contributions and HSA distributions on Form 8889


What is a Medical Savings Account (Archer MSA)?

An Archer Medical Savings Account (MSA) helps those employees of small businesses and self employed who are covered by a high deductible health plan to pay the health care costs of themselves, their spouses and their dependents. If you are employed, either you or your employer may contribute to you Archer MSA in any given year but not both. If you are self employed, only you can make contributions to your MSA


​You can set up an Archer MSA through your employer, a bank, an insurance company, or other financial institution.  Medical Savings Accounts are portable, so you can keep the account even if you change employers, and the funds in an MSA remain in the account until you spend them.


You qualify for an Archer MSA if all the following are true

  1. You are employed by a small employer Z( an employer with an average of 50 or fewer employees over the last two years) at the time you start the MSA, or you are self employed.
  2. You  are covered by a high deductible health plan
  3. ​You do not have any other general health care coverage except a high deductible health plan ( there  are exceptions for specific coverage, such as for vision,dental disability ect)


If you are eligible to be covered by Medicare, then you cannot enroll in an Archer MSA but you can only use the funds from a Medicare Advantage MSA to pay for qualified medical expenses.


If you make contributions to your MSA you can deduct the contributions on your tax return even if you do not itemize deductions, unless you are eligible to be claimed as someone else's dependent Distributions from an MSA are tax free if the money is spent on qualified medical expenses.


The maximum annual contribution to an MSA is 75% of your family health plan's annual deductible amount or 65% of the deductible if you have a self only plan. If you were not covered for the whole year ba high deductible health plan, the maximum allowable contribution to your  MSA is reduced by 1/12 per month not covered.


You may be able to carry forward excess contributions to an MSA to a Health Savings Account tax free.  There are no contribution limits for rollovers but you can only make one rollover contribution per 1 year period.


Your total Archer or Medicare Advantage MSA distributions for the year will be reported to you on Form1099-SA. when you file your tax return you must report all distributions from your HSA and contributions to your HSA on Form 8853 which can only be attached fo Form 1040


What is a Flexible Spending Account or Arrangement (FSA)

A flexible Spending Arrangement or Account is an employer sponsored account that helps you pay for you and your family's medical expenses. An FSA is funded by voluntary paycheck with holding and by employer contributions.  All money contributed to an FSA is completely tax free. no payroll or income taxes are with held from your  contributions to an FSA and contributions by your employer are excluded from your taxable income. withdrawals from a Flexible Spending Account are tax free if the money is spent on qualified medical expenses.


You can only establish an FSA through your employer. Self employed individuals are not eligible. You do not have to be covered by a high deductible plan or by any other health plan to qualify for an FSA.​The maximum amount you can contribute to an FSA through paycheck with holding is $2,500 for 2014 $2,550 for 2015. There is no IRS imposed limits on the amount your employer can contribute. There may be other limits if you are considered a highly compensated employee.At the beginning of each year in which you have a Flexible Spending Account, you must decide the amount that you will contribute to it over the course of the year. It is important not to contribute too much to an FSA, because FSAs are use it or lose it . This means that you must spend the money in the account by the end of the year or else any remaining amount is forfeited. However your employer can provide up to 2&1/2 month grace period  for you to spend the money the following year It is also possible to roll over funds from an FSA to a Health Savings Account tax free. 

HEALTH SAVINGS MEDICAL SAVINGS & FLEXIBLE SPENDING ACCOUNTS​