What Is Bank Fraud? How to Recognize It, Avoid It and Report It
How to Open a Bank Account for a Minor
How to Balance a Checkbook
Retirement Savings: How Much Should I Save Each Month?HRA vs. HSA: What’s the Difference?
Health reimbursement arrangements (HRAs) and health savings accounts (HSAs) both provide tax advantages and can help you pay for certain medical expenses. They also differ in key ways to know if you need to choose whether an HRA or HSA is best for you.
At a glance: HRA vs. HSA
| HRA | HSA |
| Eligible only if your employer offers it | Eligible if you have a high-deductible health plan (HDHP) |
| Funded by your employer | Funded by you and/or your employer |
| Owned by your employer | Owned by you |
| You will likely lose it if you leave your job | You can take it with you if you switch employers |
| Contribution limits vary by plan type | 2025 individual contribution limit is $4,300; $8,550 for families |
What is an HRA?
A health reimbursement arrangement (HRA) is an employer-funded account you can use to pay for qualified medical expenses, such as doctor’s appointments and prescription drugs.
Generally, you don’t have to pay taxes on HRA funds used on eligible medical costs. Your employer sets the rules for the HRA and decides how much to contribute.
Pros and cons of HRAs
PROS
- Access to funds for health expenses: You can use the money in your HRA for various types of medical, dental and vision expenses.
- Tax benefits: No tax deduction for contributions is available because the employer makes them on your behalf, but reimbursements are usually tax-free.
- Potential rollover of funds: Some employers may offer incentives, such as allowing you to roll over a portion of unused funds each year.
CONS
- Employer-controlled funds: That means if you leave your job, you may no longer have access to the remaining funds in your HRA.
- Variation in rules: HRA rules can differ widely by employer, which may make them hard to understand. Review eligibility requirements, in particular, before making any health care decisions.
- Rollovers may not be allowed: It will be up to your employer to decide whether to roll over any HRA funds to the next year.
How to open an HRA
You can’t open an HRA on your own — it must be offered by your employer. If you have questions about your company’s HRA or whether one is available, contact your human resources or benefits department.
What is an HSA?
A health savings account (HSA) is a tax-advantaged account you can use to pay for qualifying medical costs if you have a high-deductible health plan. Unlike an HRA, an HSA can be opened either through your employer or on your own.
Some HSAs come with a debit card, which makes it easy to pay for expenses at the time of service instead of waiting for reimbursement.
Pros and cons of HSAs
PROS
- Tax advantages: The money in your HSA grows tax-deferred, plus you don’t pay taxes on funds you withdraw for eligible medical expenses.
- Investment opportunities: A unique feature of HSAs is that you can invest your account balance in stocks, bonds or other assets, allowing it to grow over time.
- Portability of funds: Because you own the account, you can keep your HSA even if you switch jobs.
CONS
- Eligibility requirements: The eligibility requirements to open an HSA are strict — you must be enrolled in a high-deductible health plan (HDHP) to qualify.
- Higher out-of-pocket costs: Because you have an HDHP, you may have to pay more from your own pocket before insurance kicks in and covers your health care expenses.
- Contribution limits: You can only contribute up to a certain amount to an HSA per year. For 2025, the individual limit is $4,300 and the family limit is $8,550.
How to open an HSA
To open an HSA, you must be enrolled in a qualified HDHP. Confirm that your health plan qualifies: An HSA-eligible plan must set a minimum deductible and a maximum on out-of-pocket costs for individuals and families.
Generally, an individual health insurance plan with a deductible of $1,700 or a family health insurance plan with a deductible of $3,400 or more is considered an HDHP and would be HSA-eligible.
You cannot contribute to an HSA if you have disqualifying additional medical coverage, such as a health flexible spending account (FSA). If you want to open an HSA, you also cannot be claimed as a dependent on someone else’s tax return.
When you’re ready to open an HSA, you can do so:
- Through your employer: If your job offers an HSA, you can open it directly through the company’s benefits provider.
- Through an HSA provider: You can open an HSA at many banks and credit unions, as well as brokerage firms such as Fidelity. Once your account is open, you can decide how often and how much to contribute (up to the annual limit) and choose your investments.
HRA vs HSA: A closer look
HRA vs. HSA: Eligibility
To qualify for an HRA, you generally must work for an employer that offers one. HSA eligibility, on the other hand, is a bit more complex. To open an HSA, you must be enrolled in an HDHP, have no other disqualifying health insurance, and not be claimed as a dependent on someone’s tax return. Unlike HRAs, HSAs may also be available for self-employed individuals, such as freelancers or sole proprietors.
HRA vs. HSA: How to use your plan
HRAs and HSAs are similar in that both are used to pay for qualifying medical costs. However, HSAs generally offer more flexibility and portability than HRAs. Your HSA funds roll over from year to year. HRA funds may or may not roll over, depending on how your employer has structured the plan.
HRA vs. HSA: Funding
You and your employer can contribute to an HSA, while only your employer can contribute to an HRA. HSA contribution limits change slightly from year to year. In 2025, the maximum amount you can contribute is $4,300 for yourself or $8,550 if your family is also on your insurance. If you’re 55 or older, you can contribute an extra $1,000 annually. HRA contribution limits vary by plan type.
HRA vs. HSA: Ownership
A key difference between HRAs and HSAs is who owns the account. With an HSA, you are the owner, but in the case of an HRA, your employer owns it. Because you’re the owner of your HSA, you have more control over it and can take it with you if you leave your job. An HRA, on the other hand, is typically forfeited when you leave your employer, unless your employer offers a retiree HRA, a tax-advantaged account you can use after you retire that is funded by your former employer.
Should you get an HRA or an HSA?
Reasons to consider an HRA:
- Your employer offers it.
- You want tax-free money to pay for medical expenses.
- You don’t want to contribute your own funds.
Reasons to consider an HSA:
- You have a high-deductible health plan.
- You want an account that you can take with you if you switch jobs.
- You want to use it as a retirement savings tool.
What about flexible spending accounts (FSAs)?
Flexible spending accounts (FSAs) are similar to HRAs and HSAs in that they are also tax-advantaged accounts used to pay for qualifying medical expenses. Like HRAs, FSAs are typically offered by employers and generally don’t roll over from year to year. The FSA annual contribution limit is typically smaller than the HSA limit. In 2025, you can contribute $3,300 to a health care FSA as an individual, compared with $4,300 to an HSA.