Walsh Benefits - HRA/HSA

	H.R.A.	H.S.A	F.S.A.
Qualified Medical Expenses	Qualified medical expenses as defined in IRC 213(d), including over-the-counter drugs COBRA premium, including LTC premium	Qualified medical expenses as defined in IRC 213(d), including over-the-counter drugs Retiree health insurance premium other than Medicare supplement policies COBRA premium Long Term Care Insurance Premium Health Insurance Premium if receiving unemployment NOT PERMITTED: Any other type of health insurance premium	Qualified medical expenses as defined in IRC 213(d), including over-the-counter drugs. NOT PERMITTED: Health insurance premium, including LTC insurance premiums
Tax Treatment of Contributions	Only Employer Contributions permitted: Deductible by Employer Excludable from Employee’s gross income	Individual’s contributions to own H.S.A. is tax-deductible Employer – Contributions to Employee’s H.S.A. are tax deductible. Employer – Contributions to Employee’s H.S.A. (with or without cafeteria plan) with salary reduction dollars: Deductible by Employer Excluded from Employee’s gross income	Only Employer Contributions permitted: Deductible by Employer Excludable from Employee’s gross income
Taxation of Interest Accumulation	N/A	Tax-free	N/A
Consequences of Cashing-Out Account for Non-qualified Medical Expenses	No cash-out option available	Distributions are taxed as income and subject to 10% penalty tax, except following: Death Disability Attainment of Medicare – eligibility age	No cash-out option available
Carry-over of Funds Permitted	Yes	Yes	No
Death of Account Holder	Eligible dependents entitled to use remaining account monies for qualified medical expenses, in accordance with the plan document	Surviving spouse only (if designated beneficiary) entitled to use remaining account monies for qualified medical expenses	Eligible dependents entitled to use remaining account monies for qualified medical expenses, in accordance with the plan document
Applicability of ERISA	Yes	No	Yes
Subject to COBRA	Yes	COBRA rules apply to HDHP portion of H.S.A., but not to the account	Yes

OVERVIEW

Any funds reimbursed from HRA are exempt from employer’s payroll taxes and Social Security taxes.
Self-employed individuals, partners, and 2% owners of an S-Corporation are not eligible.
HRA funds can either “roll-over” from year to year or an employer can “reset” the amount yearly.
HRA funds can be used for IRS approved expenses, as long as funds available in HRA were incurred by employee/dependent during period of HRA eligibility; Reimbursements cannot be made for prior tax years.
All medical care expenses submitted for reimbursement must be substantiated.
Discrimination in favor of highly compensated individuals is not allowed.
Company plan documentation must specify the order of disbursements if the company offers an HRA and FSA. (example: FSA pays prior to HRA).
Employer contributions to an HRA may not be attributable to a salary reduction.
HRA’s are subject to COBRA rules by providing for the continuation of the maximum reimbursement amount for an individual at the time of the COBRA event.

Comparison:

	H.R.A.	H.S.A	F.S.A.
Establishment of Account	Employer-sponsored Benefit Program	Eligible Individual Employer Integrate w/ Employer-sponsored cafeteria plan	Employer-sponsored Benefit Program via cafeteria plan
Account Type	General Assets of Employer Trust	Trust or Custodial Account	General Assets of Employer Trust
High Deductible Health Plan (HDHP) Required	No	Yes	No
Eligibility	Employee who meets Employer’s Eligibility Criteria	Eligible Individual covered by qualified HDHP Eligible Employee covered by qualified HDHP	Employee who meets Employer’s Eligibility Criteria
Funding	Strictly Employer	Individual Employee salary reduction dollars Employer	Employee Salary Reduction Dollars Employer
Account Limits (2009)	No statutory required limit	Deductible – Minimum Self ($1150) Family ($2300) Annual Contribution Limit: Self ($3000) Family ($5950) Maximum Out-of-Pocket: Self ($5800) Family ($11,600)	No statutory required limit