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FSAs, HSAs, or HRAs: What's Best for Your Business?

A business is a complex, and time-consuming endeavor. To make efficient decisions, it's essential to understand the financial system as well as how offering different benefits to your employess plays into that system. That's why, when it comes to setting up your business finances, you should take the time to understand different types of benefit plans for your employees. Understanding your business's financial structure will help you make informed decisions about your business operations and employee benefits.

A business must have a solid health insurance plan. This plan is usually called an employee health benefit plan, or EHP. Most companies offer EHPs to their employees, and they are designed to help employees get affordable health care coverage. If you want to offer your employees affordable health care coverage, you must choose an EHP that satisfies the mandate requirements of the Affordable Care Act (ACA)

Different Types of Plans

When it comes to an EHP, employers have a lot of different options. You can offer different packages for health benefits. Some of these packages are HSA's (Health Savings Accounts), FSA's (Flexible Spending Account) and HRA's (Health Reimbursement Arrangement). All of these plans have different pros and cons. In this article we are going to discuss them.

Benefits of HSA's

Out of all the health investment account options, HSA's offer the most tax breaks. This type of plan requires employees invest with pre tax dollars. This saves you on having to pay taxes as well as gives you the ability to benefit from those dollars that would normally go to taxes. Your HSA investments can grow tax free as well until you withdrawal the funds for qualifying medical expenses, which are also withdrawn tax free. HSA are not use it or loose it either, so the money that you pay in is the money that you'll get to use.

Benefits of FSA's

When you open an FSA for your employees, the money comes from their actual pay check, pre tax. This money is put into an account that can be used at the employees disposal such as medical, dental, or vision costs. They can also be used for gym memberships, day care costs, and other things. Sometimes they can even be used for flexible paid sick time if needed. Thats why they are known as Flexible Spending Accounts.

The pre tax accumulation of these funds can also be a huge benefit because employees end up with more money overall to spend on the health care expenditures that they need. That also means the expenses cost the employee less depending on their tax bracket.

Overall FSAs are a great way to help you manage your money and keep employees happy. They have been around for many years, and over the years, have developed into an effective tool for managing your money.

Benefits of HRA's

This type of benefit plan is one where the employee pays for their medical expenses and their employee reimburses the ones that qualify to be reimbursed. The reimbursement check that the employees receive is generally tax free which is one of the perks of this type of plan. In contrast to the other two types of plans we have discussed in this article, this type of plan is employer funded rather than employee funded. This type of plan can also be used to reimburse employees for health insurance premiums as well as dental and vision insurance premiums.


It's important to note that if you are looking for a plan that will help you save money on taxes, or save your employees money on their various medical expenses and taxes, any of these plans will be a good option. To learn more about your options, get started by scheduling a free consultation with 19:21 Consultants.


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