Health Savings Account

Health Reimbursement Arrangement

Health Care Flexible Spending Account under the FSAFEDS Program

Limited Expense Health Care Flexible Spending Account under the FSAFEDS Program

Medicare Prescription Drug, Improvement, & Modernization Act of 2003 and supplemental guidance from the IRS

IRS Guidance 2002-45

Internal Revenue Code Section 125

Same as HCFSA

The FEHB member must be enrolled in a High Deductible Health Plan (HDHP). The member may not be enrolled in other general medical insurance coverage, an FSAFEDS Health Care Account, or Medicare and may not be claimed as a dependent on another person's tax return (but may be a spouse filing jointly).

The FEHB member must be enrolled in an HDHP and not qualified for an HSA

Federal employees (in executive branch agencies and other agencies offering FSAFEDS) who are eligible for the FEHB Program (whether or not enrolled in FEHB) are eligible for an HCFSA

The LEX HCFSA is designed for employees eligible for the FEHB Program and the FSAFEDS Program who are enrolled in an HDHP with HSA.

FEHB member

The health plan

Employee

Employee

The health plan's monthly "premium pass through" is deposited into the member's account. Individual voluntary contributions can be made directly to the account to bring the account to the maximum amount.

The health plan credits a portion of the premium to the HRA. Some plans may credit the annual amount at the beginning of the plan year. Individual contributions are not allowed.

The employee funds the account. The employee makes an annual election (up to $5,000 for 2008). The election is divided into allotments based on the number of pay dates in the plan year. Every pay date, an allotment is deposited directly into the employee's HCFSA account.

Same as HCFSA with allotments deposited directly into the employee's LEX HCFSA account.

No.

The health plan's credits must be used while the member is covered by that plan. Unused credits are forfeited if the member terminates employment, (other than retirement) or changes health plans.

Yes. Unused balances are forfeited. Expenses must be incurred by the end of the 14 1/2 month benefit period (or by termination of employment, if before the end of the benefit period). Otherwise, the employee loses unused funds.

Same as HCFSA.

Yes. The FEHB member owns the account and any contributions made to it, regardless of the source or timing of the contribution.

Yes. Unused credits carry over year to year as long as the FEHB member remains in the sponsoring health plan.

Yes, to some extent. The employee has until March 15 following the end of the plan year to incur expenses (or by termination of employment, if earlier). Claims for reimbursement must be submitted by May 31 following the end of the plan year.

Same as HCFSA.

HSAs are only available with an HDHP. An HDHP has:

• a minimum annual deductible of $1,100 for Self and $2,200 for Self and Family coverage and
• a maximum annual out of pocket limit of $5,600 for Self and $11,200 for Self and Family.

Amounts/limits are indexed for inflation.

HRAs are available with an HDHP for those not eligible for an HSA.

Any type of health plan arrangement is allowed. Employees who are not enrolled in FEHB but who are eligible to participate in FEHB can still enroll in an HCFSA.

This account is designed for employees enrolled in an HDHP with an HSA.

Yes. The FEHB member owns the account and keeps the account even if the member changes health plans or leaves Federal employment.

Credits in an HRA are forfeited if the member leaves Federal employment (except for retirement) or changes plans.

Only if the employee transfers between agencies that both participate in FSAFEDS.

Same as HCFSA.

Interest accrues on a tax-free basis in qualified HSAs.

Credits in an HRA do not earn interest.

Interest does not accrue.

Same as HCFSA.

The health plan determines the amount of the annual "premium pass through." Individual voluntary contributions plus the annual "premium pass through" may not exceed the total annual contributions allowed by the IRS.

The health plan determines the portion of the health plan premium credited to the HRA. The credit to the HRA is not taxable income to the FEHB member. Individual contributions are not allowed.

OPM determines the minimum and maximum annual amount each employee can contribute. Within these amounts, the employee decides how much to contribute. Under FSAFEDS (both LEX HCFSA and HCFSA), for 2008, the minimum annual contribution is $250 and the maximum is $5,000.

Same as HCFSA.

Yes, FEHB members from ages 55 up to age 65 may contribute more to their account per year, until they are enrolled in Medicare (age 65). In 2008 an additional $900 contribution is allowed, increasing $100 per year until the contribution reaches a cap of $1,000 in 2009. These contributions are in addition to the plan's deductible and are "above the line" deductions on the member's Federal income tax.

No.

No.

No.

Eligible Federal employees who are enrolled in HDHPs can make pre-tax allotments to their HSAs through The Federal Flexible Benefits Plan (FEDFLEX). Please visit (BAL 07-202) for more information. Your own HSA contributions are either tax- deductible or pre-tax (if made by payroll deduction). See IRS Publication 969

Not applicable.

Yes.

Yes.

An FEHB member's voluntary contributions are tax deductible, up to the annual maximum allowable amount. Account distributions are tax-free as long as funds are spent on qualified medical expenses.

Reimbursements are limited to qualified medical expenses and are tax-free.

Employee contributions to an HCFSA are pre-tax and therefore reduce annual taxable income, including FICA taxes. Reimbursements are only allowed for eligible medical expenses.

Qualified medical expenses defined under §213(d) of the Internal Revenue Code (IRC), except for amounts distributed to pay health insurance premiums. HSAs can be used to pay premiums for (1) Temporary Continuation of Coverage (TCC), (2) Long Term Care Insurance (3) retiree health insurance premiums including Medicare after age 65 (4) health insurance premiums while receiving unemployment compensation and (5) over-the-counter medications.

Qualified medical expenses defined under §213(d) of the Internal Revenue Code (IRC) (including health care, over-the-counter medications, Medicare insurance premiums and qualified Long Term Care Insurance premiums) except for medical expenses explicitly prohibited from reimbursement by FEHB law.

Qualified medical expenses defined under §213(d) of the Internal Revenue Code (IRC), except for amounts paid for health insurance premiums and long term care insurance premiums, but including most over-the-counter medicines and products.

Qualified dental care and vision care expenses defined under §213(d) of the Internal Revenue Code (IRC).

Yes, but non-health care distributions are included in gross income and subject to a 10% penalty if under age 65.

No.

No.

No.

No. However, no reimbursements can be made for expenses incurred prior to the establishment of the account.

No. However, no reimbursements can be made for expenses incurred prior the effective date of plan enrollment.

Expenses must be incurred between the effective date of enrollment and the end of the 2-1/2 month grace period) in order to be eligible for reimbursement.

Same as HCFSA.

No. Only the amount of the accumulating health plan monthly "premium pass through" and the individual's voluntary contributions to date are available for reimbursement.

It depends on the way the health plan chooses to administer this benefit.

Yes. The annual amount the employee elected is available on the first day of coverage regardless of the amount contributed by the date of the reimbursement request.

Same as HCFSA.

No. The member should be prepared to substantiate to the IRS the expense has been incurred, the amount of the expense, and its eligibility.

Yes. IRS regulations governing HRAs require each claim be substantiated by an "explanation of benefits" statement or through itemized receipts.

Yes. IRS regulations governing HCFSAs require each claim be substantiated by an "explanation of benefits" statement or through itemized receipts. Some expenses may require a letter of medical necessity from the employee's physician.

Same as HCFSA.

Generally, no. If the FEHB member is enrolled in an HDHP with an HSA, participation in a general HCFSA is not allowed. However participation in a Limited Expense HCFSA is allowed.

Yes. If the FEHB member is enrolled in an HDHP with participation in an HCFSA is allowed. Also, if HSA eligibility is lost during the plan year, the member may then have an HRA.

Yes. HCFSA enrollees can have HRAs, but not HSAs.

Yes. LEX HCFSA enrollees can have HSAs.