Healthcare costs continue to rise, with the average annual premiums for employer-sponsored family health coverage up by 6% in 2025 compared to 2024. As a result, employers face growing pressure to offer meaningful benefits without stretching already tight budgets. Employees also want more support as they manage everyday medical expenses and prepare for future healthcare needs.
Understanding Tax-Advantaged Accounts
A health savings account (HSA), flexible spending account (FSA), and health reimbursement arrangement (HRA) each help reduce healthcare costs through tax advantages. Yet these similarities can make the decision more confusing. Each account follows different rules, ownership varies, funding works differently, and long-term value depends on how employees use their benefits.
An HSA offers one of the strongest tax benefits available through an employer-sponsored health plan. It’s a personal savings account available to employees enrolled in a qualifying high-deductible health plan (HDHP). Employees can contribute pretax dollars, invest their savings over time, and withdraw funds tax-free for eligible healthcare expenses.
HSA Eligibility and Benefits
HSA eligibility follows strict Internal Revenue Service (IRS) requirements. Employees must meet all requirements before contributing. To qualify, an employee must be enrolled in an HDHP. The HSA belongs to the employee, and the account stays with them when they change jobs or retire, creating a long-term healthcare savings vehicle instead of a short-term spending account.
The IRS establishes annual contribution limits for the HSA. For 2026, employees may contribute $4,400 for self-only coverage, $8,750 for family coverage, and, for employees age 55 and older, an additional $1,000 as a catch-up contribution. HSA funds also never expire, and every unused dollar rolls into the following year automatically.
FSA and HRA Options
An FSA helps employees pay for eligible healthcare expenses using pretax dollars during the plan year. However, the FSA belongs to the employer, rather than the employee. Employees contribute through payroll deductions, reducing their taxable income while setting aside money for anticipated medical expenses.
An HRA works differently from both an HSA and an FSA. Instead of employees contributing money to an account, the employer sets aside funds and reimburses employees for eligible healthcare expenses. Employees cannot contribute to an HRA, and the account is owned by the employer.
Original reporting: KTVZ (Central Oregon) — read the source article.
