Savings Accounts for Health Care Expenses

There are four different plans (with different qualifying criteria) which can be set up to save for future medical expenses. In the paragraphs below, the different plans are named, followed by a brief description of each plan. For complete information, refer to IRS Pub 969.

Health Savings Accounts (HSAs)

A Health Savings Account (HSA) is a tax-exempt trust or custodial account you set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur. You must be an eligible individual to qualify for an HSA. (ref Form 8889)

Medical Savings Accounts (MSAs)

An Archer MSA is a tax-exempt trust or custodial account that you set up with a U.S. financial institution (such as a bank or an insurance company) in which you can save money exclusively for future medical expenses. (ref Form 8853)

Flexible Spending Arrangements (FSAs)

A health care Flexible Spending Arrangement (FSA) allows employees to be reimbursed for medical expenses. FSAs are usually funded through voluntary salary reduction agreements with your employer. No employment or federal income taxes are deducted from your contribution. The employer may also contribute.

Health Reimbursement Arrangements (HRAs)

A Health Reimbursement Arrangement (HRA) must be funded solely by an employer. The contribution canít be paid through a voluntary salary reduction agreement on the part of an employee. Employees are reimbursed tax free for qualified medical expenses up to a maximum dollar amount for a coverage period. An HRA may be offered with other health plans, including FSAs.