Another key: the honor system. With HSAs, the employee has the responsibility for making sure the account’s funds are used for health-related costs. “It’s between the individual, the IRS, and God what the money is spent on,” says Domaszewicz. “Someone could go down to the corner store and buy a six pack of beer with funds from the account.”
Joseph McCafferty is editor of CFO Human Capital.
|By All Accounts
A comparison of HSAs and HRAs.
|Eligibility||Individuals||Must be an employee|
|Health-insurance requirements||High-deductible plan||None (employer’s discretion)|
|Who contributes||Employee, employer, or both||Employer only|
|Contribution limits||Lesser of deductible ($1,000 single/$2000 family minimum) or IRS annual limit ($2,650/$5,250)||None (employer’s discretion)|
|Funds rollover||Allowed||Allowed (employer can establish limits)|
|Portability||Can take to new employer||Usually no portable (employer’s discretion)|
|Nonqualified withdrawals||Yes (taxable with 10% penalty)||No|
|Claims substantiation||Not required||Required|
|Source: Mercer Human Resource Consulting|