Key Takeaways
- FSAs allow pre-tax contributions but are subject to use-it-or-lose-it rules.
- HRAs are employer-funded reimbursements with employer-controlled rules.
- Archer MSAs are legacy accounts for small employers and high-deductible plans.
- Account eligibility, portability, and ownership differ across FSA, HRA, and HSA.
- Tax reporting and documentation are required for reimbursements.
- Comparing accounts helps match tax benefits to plan design.
Last updated: December 2025
Other Tax-Advantaged Accounts
Beyond HSAs, several other tax-advantaged accounts help individuals and families manage healthcare costs. Each has unique features, limitations, and tax implications.
Flexible Spending Accounts (FSAs)
Health FSA Overview
| Feature | Details |
|---|---|
| Who offers | Employers through Section 125 plans |
| Funding | Pre-tax salary reduction |
| 2025 contribution limit | $3,300 |
| Use-it-or-lose-it | Yes (with exceptions) |
FSA Tax Benefits
| Benefit | Details |
|---|---|
| Contributions | Pre-tax (reduces income and FICA taxes) |
| Distributions | Tax-free for qualified expenses |
| Employer contributions | Tax-free to employee |
Use-It-or-Lose-It Rules
| Option | Details |
|---|---|
| Grace period | 2.5 months after plan year |
| Carryover | Up to $660 into 2026 |
| Choice | Employer chooses one option (or neither) |
| Forfeit | Unused funds beyond limit revert to employer |
Key Point: Unlike HSAs, FSA funds that are not used within the plan year (plus any grace period or carryover) are forfeited. Careful planning is essential.
Dependent Care FSA
| Feature | Details |
|---|---|
| Purpose | Childcare and elder care expenses |
| 2025 limit | $5,000 ($2,500 if married filing separately) |
| Age limit | Dependents under 13 (no age limit for disabled) |
| Qualified expenses | Daycare, after-school care, day camp |
Limited Purpose FSA
| Feature | Details |
|---|---|
| Purpose | Dental and vision expenses only |
| HSA compatible | Yes |
| Contribution limit | $3,300 (2025) |
| Use | Preserves HSA for future medical/retirement |
Health Reimbursement Arrangements (HRAs)
HRA Overview
| Feature | Details |
|---|---|
| Who funds | Employer only (no employee contributions) |
| Ownership | Employer |
| Portability | Generally not portable |
| Rollover | Employer determines |
Types of HRAs
| Type | Description |
|---|---|
| Traditional HRA | Used with employer health plan |
| QSEHRA | Qualified Small Employer HRA |
| ICHRA | Individual Coverage HRA |
| Excepted Benefit HRA | Limited benefits only |
QSEHRA (Qualified Small Employer HRA)
| Feature | 2025 Details |
|---|---|
| Employer size | Under 50 employees |
| No group plan | Cannot offer group health insurance |
| Maximum reimbursement | $6,350 individual / $12,800 family |
| Used for | Individual health insurance, medical expenses |
ICHRA (Individual Coverage HRA)
| Feature | Details |
|---|---|
| Employer size | Any size employer |
| Requirement | Employee must have individual coverage |
| No dollar limit | No federal maximum |
| Marketplace impact | Affects subsidy eligibility |
| Classes | Employer can offer to specific employee classes |
Exam Tip: ICHRAs allow employers of any size to reimburse employees for individual health insurance premiums. Unlike QSEHRAs, there's no dollar limit on ICHRA contributions.
HRA Tax Treatment
| Aspect | Tax Treatment |
|---|---|
| Employer contributions | Deductible to employer, excluded from employee income |
| Reimbursements | Tax-free for qualified expenses |
| Unused amounts | No tax consequence (employer property) |
Archer MSAs
Archer MSA Overview
| Feature | Details |
|---|---|
| Status | Legacy accounts (no new accounts since 2007) |
| Who could participate | Self-employed, small employer employees |
| Still in use | Existing accounts can continue |
| Similar to | HSAs |
Archer MSA vs. HSA
| Feature | Archer MSA | HSA |
|---|---|---|
| New accounts | Not available | Available |
| HDHP required | Yes | Yes |
| Contribution limits | 65%/75% of deductible | Fixed amounts |
| Early withdrawal penalty | 15% | 20% |
| Employer restrictions | Small employer only | Any employer |
Account Comparison Summary
Key Differences
| Feature | FSA | HRA | HSA |
|---|---|---|---|
| Who contributes | Employee (pre-tax) | Employer only | Both |
| Portability | No | Usually no | Yes |
| Rollover | Limited | Employer decides | Unlimited |
| HDHP required | No | Some types | Yes |
| Investment options | No | No | Yes |
| Ownership | Employer | Employer | Employee |
Choosing the Right Account
| Situation | Best Account |
|---|---|
| HDHP enrollee wanting long-term savings | HSA |
| Known expenses, predictable costs | FSA |
| Employer wants to control costs | HRA |
| Self-employed | HSA (if HDHP) |
| Employee with traditional health plan | FSA |
Tax Reporting
Form Requirements
| Account | Form |
|---|---|
| HSA | Form 8889, Form 5498-SA, Form 1099-SA |
| FSA | W-2 (informational) |
| HRA | None for employee |
| Dependent Care FSA | Form 2441 |
HSA Reporting
| Form | Purpose |
|---|---|
| Form 8889 | Report contributions and distributions |
| Form 5498-SA | Contribution information (from trustee) |
| Form 1099-SA | Distribution information |
| Schedule 1 | Deduction for direct contributions |
Key Point: HSAs require specific tax reporting on Form 8889, attached to the tax return. Taxpayers must track contributions, distributions, and qualified expenses to properly report HSA activity.
Key Takeaways
- FSAs allow pre-tax contributions but are subject to use-it-or-lose-it rules.
- HRAs are employer-funded reimbursements with employer-controlled rules.
- Archer MSAs are legacy accounts for small employers and high-deductible plans.
- Account eligibility, portability, and ownership differ across FSA, HRA, and HSA.
- Tax reporting and documentation are required for reimbursements.
- Comparing accounts helps match tax benefits to plan design.
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Test Your Knowledge
What is the 2025 Health FSA contribution limit?
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Test Your Knowledge
Which type of account can ONLY be funded by the employer?
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Test Your Knowledge
What happens to unused FSA funds at the end of the plan year?
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Test Your Knowledge
An employee with an HSA wants to also have an FSA. Which type of FSA is HSA-compatible?
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D