National Association of Health Underwriters
Comparison of Health Savings Accounts (HSAs), Medical Savings Accounts (MSAs), Flexible
Savings Accounts (FSAs) and Health Reimbursement Arrangements (HRAs)
Health Savings Medical Savings Health Flexible Savings Account
Account (HSA) Account (MSA) Reimbursement (FSA)
Account Overview Tax-exempt trust or A tax-exempt trust An employer funded A cafeteria plan authorized
custodial account or custodial account used to under Section 125 of the
created to pay for the account with a reimburse employees Internal Revenue Code. FSAs
qualified medical financial institution for qualified medical can be created to reimburse for
expenses of the account in which account care expenses. qualified medical expenses,
holder and his/her holders can save health insurance premiums for
spouse or dependents. funds to use premium-only accounts, or
exclusively for dependent care expenses.
Funding Individual and/or an Employer or Employer-only (self- Typically funded by an
employer. employee (not employed individuals employee.
both) or self- are precluded).
Eligibility Individuals and families An employee or An employee whose An employee whose employer
covered by a qualified the spouse of an employer offers an offers an FSA option.
high-deductible health employee of a HRA. Employees may also create a
insurance plan. small employer2 Dependent Care Account for
covered by an qualifying dependents.
individuals or a
spouse of a self-
Medical Savings Accounts were authorized as a demonstration project in 1996 under the Health Insurance
Portability and Accountability Act (HIPAA). Provisions expired December 31, 2003 and were not
reauthorized. Existing MSAs may continue or be transferred into a Health Savings Account but no new
MSAs can be authorized.
Small employer is defined as an employer with 50 or fewer employees.
Health Plan Qualified high- For 2003, the high- No corresponding No corresponding health plan
Requirements deductible health deductible health health plan requirements.
insurance plan with a plan requirements requirements.
minimum of a $1,000 for individual
annual deductible for an deductibles must
individual and $2,000 be between $1,700
for families. Maximum and $2,500 and
out-of-pocket limits, between $3,350
including the and $5,050 for
deductible, are $5,000 families.
for an individual and Maximum out-of-
$10,000 for a family. pocket expenses
The HDHP may are limited to
provide first-dollar $3,350 for
coverage for preventive individuals and
care.3 $6,150 for
may provide first-
dollar coverage for
Contributions Account holders or an Employees or Only an employer An employee, employer or
employer or both may employers may may contribute to an both may contribute to an
contribute to an HSA. contribute to an HRA. FSA.
A maximum of up to MSA but not both There are no limits to There are no limits to
100% of the deductible in the same year. the amount an contributions for an FSA
amount of the Up to 75% of the employer may however, employers typically
corresponding HDHP amount of the contribute. set a limit.4
up to $2,600 for an annual HDHP
individual and $5,150 deductible for
for a family account family coverage
may be contributed for and 65% of the
2004. deductible for an
individual may be
Once an individual contributed.
turns 65, contributions Contributions are
are no longer permitted limited to the
however; funds may amount of earned
continue to be income for the year
withdrawn from from an employer
existing accounts. or for a self-
individual, the net
Qualified Medical Unreimbursed qualified Same requirements Unreimbursed Same requirements as HSAs.
Expenses medical expenses as as HSAs. qualified medical
defined in Section 213 expenses as defined
(d) of the Internal in Section 213 (d) of
Revenue Code, except the Internal Revenue
(in general) for health Code, including
For Preferred Provider Organizations (PPOs), the maximum out-of-pocket expenses refer to in-network
The maximum annual contribution for Dependent Care Accounts is $5,000 for individuals with
dependents or for individuals filing taxes jointly.
insurance premiums: health insurance
e.g., amounts paid for premiums.
prescription drugs, and
services not paid for by
Funds generally may
not be used to pay
Carryover HSA funds may be Same requirements Unused funds in an Funds from an FSA may not
carried over indefinitely as HSAs. Unspent HRA may be carried carryover to the following
throughout an account funds currently in over but are subject to year and leftover balances are
holder’s lifetime. Upon an MSA may be limitations set by an forfeited by the employee.
death, an account may rolled over into a employer.
be passed on to a HSA.
surviving spouse with
out federal tax liability.
Portability Employees may take Same requirements HRA funds may be Funds from an FSA are not
accounts with them as HSAs. portable but the portable and employees forfeit
when leaving or decision is at the unused balances when leaving
changing jobs. discretion of the or changing jobs.
Tax Status Employee contributions Same requirements Employer Employees are not subject to
are tax deductible and as HSAs. contributions are federal, Social Security, or in
employer contributions generally excludable most states, state taxes on
are excludable from from an employee’s contributions to an FSA.
gross income and not gross income.5 Employers are not subject to
subject to employment FICA or unemployment taxes
taxes. on FSA contributions.
Withdrawals Funds not used to pay Funds not used to Withdrawals for non- Withdrawals for non-medical
for qualified medical pay for qualified medical expenses are expenses are not permitted
expenses may be medical expenses not permitted.
withdrawn but are may be withdrawn
subject to an additional but are subject to
10% tax penalty except an additional 15%
when an individual is tax penalty except
65 or older, disabled or when an individual
has died during the is 65 or older,
year. disabled or has
died during the
Interest Interest accrues without Same requirements No requirement exists Interest does not accrue for
a tax penalty. as HSAs. however; employers FSA funds.
have discretion to
credit interest to HRA
Health Insurance HSA funds may be MSA funds may be Generally, funds from A separate premium only FSA
In an arrangement where an employer distributes unused HRA funds at termination either as a death
benefit or as part of a severance arrangement, the funds will not qualify. Employers receive expense
deductions for payments.
Premium Payment used to pay health used to pay health an HRA can be used may be created to pay an
insurance premiums in insurance to pay for health employee’s contribution
the following premiums in the insurance premiums toward the monthly cost of
situations: following under: health insurance premiums.
• While an situations: • The Under a salary reduction
individual • While an employee’s arrangement, the employee
receives individual health plan agrees to contribute a portion
unemployment receives • A spouse’s of salary on a pre-tax basis to
insurance unemploy health plan pay for qualified benefits.
• While an ment • An
individual insurance employee’s Long-term care insurance is
receives • While an retiree health specifically excluded as a
COBRA individual plan qualified benefit under the IRS
continuation receives • COBRA code
benefits. COBRA continuation
• When an continuati coverage
reaches age 65 benefits. Individuals may use
for any health HRA funds to pay for
insurance Funds from an qualified long-term
except MSA may be used care insurance
Medicare to pay for qualified premiums.
supplement long-term care
Funds from an HSA
may be used to pay for
PLEASE NOTE: The information presented in this analysis is the exclusive property of the National Association of Health
Underwriters (NAHU). It was prepared as an informational resource for NAHU members, state and federal policymakers and other
interested parties. It is not to be duplicated, copied, or taken out of context. Any omission or the inclusion of incorrect data is
unintentional. If you have any questions about the information presented in this document, please contact John Greene, NAHU
Director of Federal Affairs at firstname.lastname@example.org or (703) 276-3807.