The short version
- HSAs, health FSAs and HRAs have different funding and ownership rules.
- The confirmed 2027 basic HSA limits are $4,500 self-only and $9,000 family.
- Confirm eligibility and current plan limits before setting payroll contributions.
Compare the three arrangements
| Question | HSA | Health FSA | HRA |
|---|---|---|---|
| Who funds it? | Employee, employer or others, within the combined limit | Employee salary reductions; employer contributions may also be permitted | Employer only |
| Who holds the benefit? | Employee owns the account | Employer-sponsored arrangement | Employer-sponsored reimbursement arrangement |
| What happens to unused amounts? | Remain in the account | Usually forfeited, subject to permitted plan features | Carryover depends on the arrangement and plan terms |
| Does it follow the employee? | Yes | Not generally; continuation rights may apply | Not a portable employee-owned account; post-employment access depends on terms |
| Does an employee need HSA eligibility? | Yes, to contribute | No, but coverage can affect HSA eligibility | No, but coverage can affect HSA eligibility |
This table concerns health FSAs, not dependent-care FSAs. The details come from the plan documents and tax rules. Source: IRS Publication 969
HSA: support savings alongside eligible coverage
An HSA belongs to the employee. It can be particularly useful when the business wants to help employees build funds for eligible healthcare expenses over time.
The IRS has confirmed these 2027 amounts for standard HSA-qualified high-deductible health plans:
| 2027 amount | Self-only coverage | Family coverage |
|---|---|---|
| Annual HSA contribution limit | $4,500 | $9,000 |
| Minimum HDHP deductible | $1,750 | $3,500 |
| Maximum HDHP out-of-pocket expenses, excluding premiums | $8,700 | $17,400 |
The contribution limit includes employer and employee contributions together. It is not a separate allowance for each. Source: IRS Revenue Procedure 2026-24
Illustration: For an employee eligible for the full-year self-only limit, a $1,000 employer HSA contribution would leave $3,500 of the basic 2027 limit available for other contributions. Eligibility changes and any permitted catch-up contribution require separate review.
A high deductible alone does not establish HSA eligibility. Other coverage and individual circumstances matter. Confirm both the health plan’s status and the employee’s eligibility before setting payroll contributions. The IRS also provides guidance on newer HSA rules, including certain direct-primary-care and telehealth arrangements. Source: IRS Notice 2026-5
Health FSA: help employees plan for expected expenses
A health FSA can help employees set aside pay for eligible expenses during the plan year. The annual election needs care because unused amounts are generally subject to forfeiture. If the plan offers a permitted carryover or grace period, explain that feature clearly; a claims-submission deadline is a separate issue.
For reference, the IRS announced a $3,400 employee salary-reduction limit for 2026 and a maximum permitted carryover of $680 for plans allowing carryover. Those are 2026 figures. Verify the IRS’s 2027 announcement and your plan’s adopted limits before issuing 2027 enrollment materials. Source: IRS 2026 inflation adjustments
Do not assume an employee can pair any health FSA with an HSA. A general-purpose health FSA can interfere with HSA eligibility; properly designed limited-purpose arrangements may work differently. Source: IRS Publication 969
HRA: define what the business will reimburse
An HRA is funded by the employer. Its design determines which eligible expenses are reimbursable and whether unused amounts remain available.
“HRA” describes several arrangements, not one universal benefit. An HRA used alongside a group plan differs from an individual coverage HRA or a qualified small employer HRA. Employers considering individual-premium reimbursement should compare the specific rules before choosing a design. Sources: ICHRA guidance and QSEHRA guidance
Choose a benefit employees can understand
Before implementing an account, ask the administrator to show an example enrollment explanation, payroll setup and reimbursement process. Test whether an employee can answer three questions: how much is available, what can it pay for and what happens to anything unused?
Benefit Experts can help you discuss account options alongside your broader benefits strategy. Contact us to review the health plan, employer contribution and administrative support together.
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