Employer benefit accounts in Washington
Make your benefit dollars
work with a plan.
HRAs, HSAs, FSAs and pre-tax payroll plans solve different problems. Start with what you want to fund, who should control the money and how the account fits your health coverage.
A practical starting point
Choose the account around the job
| Tool | Who funds it? | What it can do | What to check |
|---|---|---|---|
| HRA | Who funds it?Employer only | What it can doReimburse expenses allowed by the specific HRA, which may include insurance premiums. | What to checkHRA type, eligible employees, covered expenses and reimbursement limits. |
| HSA | Who funds it?Employer, eligible employee or both | What it can doBuild employee-owned savings for qualified medical expenses. | What to checkHSA contribution eligibility and the combined annual contribution limit. |
| Health FSA | Who funds it?Employee salary reductions; employer contributions may also be available | What it can doReimburse eligible health expenses under the employer’s plan. | What to checkAnnual elections, claim deadlines and the plan’s permitted carryover or grace period. |
| Section 125 plan | Who funds it?Supports permitted employee pre-tax elections | What it can doAllow eligible benefits, such as employee group-premium contributions, through payroll. | What to checkWritten plan terms, election rules, testing and payroll setup. |
Employer-funded reimbursement
An HRA is a category, not one benefit
Individual coverage
ICHRA
For employers considering an allowance toward qualifying individual insurance or Medicare. Employees select coverage; the employer establishes the reimbursement benefit.
Eligible small employers
QSEHRA
For eligible employers that are not applicable large employers and do not offer a group health plan. Annual federal benefit limits apply.
Alongside group coverage
Integrated HRA or EBHRA
An integrated HRA can complement group medical coverage. An EBHRA is a separate, limited design that requires a traditional group-plan offer.
Read more: HealthCare.gov: compare HRA options
Employee accounts
Explain ownership and deadlines up front
Health Savings Account
Savings employees keep
An HSA belongs to the employee and its balance carries forward. Contributions require HSA-eligible coverage and satisfaction of the other eligibility rules. Qualified medical withdrawals are generally federally tax-free; nonqualified withdrawals can be taxable and may incur an additional tax.
Health Flexible Spending Account
An annual spending election
A health FSA helps employees plan for eligible out-of-pocket expenses. Unused funds generally follow use-it-or-lose-it rules, subject to a permitted carryover or grace period if the plan adopts one. A dependent care FSA is a separate benefit with different rules.
Check HSA compatibility before combining accounts. A general-purpose health FSA or HRA can make an employee ineligible to contribute to an HSA. Limited-purpose, post-deductible or premium-only arrangements may work when properly designed. Medicare enrollment and other coverage also matter.
Read more: IRS: HSAs, FSAs and HRAs · IRS: HSA guidance for 2026
Section 125 & payroll
Pre-tax treatment starts with the right setup
A Section 125 cafeteria plan is a written employer plan governing permitted benefit elections. It can allow eligible employees to pay their share of group premiums before applicable taxes. Simply labeling a deduction “pre-tax” does not establish the plan.
- Match payroll deductions to current written plan documents and employee elections.
- Review eligibility, permitted election changes and applicable nondiscrimination testing.
- Keep HRA reimbursements separate from employee salary reductions: employees do not contribute to an HRA.
Buying through the exchange? The employee’s remaining premium for exchange coverage cannot be paid through pre-tax Section 125 salary reductions. An ICHRA may reimburse eligible exchange premiums; the payroll rule is a separate issue.
Read more: IRS: cafeteria plans · Federal HRA questions and answers
Put the pieces together
Three questions for your benefits review
01
What are you trying to improve?
Separate premium affordability, deductible support and employee savings. Each may call for a different account.
02
How will employees use it?
Review enrollment, reimbursement timing, documentation and the help employees will need.
03
What must work behind the scenes?
Coordinate the administrator, payroll, plan documents and insurance effective dates before announcing the benefit.
Common questions
Avoid surprises at enrollment
Do unused HRA dollars belong to the employee?
An HRA is an employer reimbursement arrangement, not an employee-owned savings account. Carryover, forfeiture and any post-employment reimbursement rights depend on the plan. Unused allowances are not automatically payable as cash.
Can an HRA replace our group medical plan?
An ICHRA or, for an eligible small employer, a QSEHRA may be an alternative. An EBHRA cannot replace the required traditional group-plan offer. Compare employee premiums, networks and tax-credit effects before changing coverage.
Which option saves the most?
There is no universal winner. Compare total employer costs, employee contributions, expected out-of-pocket exposure, administration and the value of the coverage available where employees live.
Washington Insurance Brokers
Build a benefit your business can sustain.
Let’s compare the options for your team
Tell us your employee count, locations, current benefits and budget goals. We can help compare insurance options and support employees shopping for individual or family coverage through Washington Healthplanfinder.
Information reviewed September 19, 2026. Eligibility, reimbursement rules and tax treatment depend on the arrangement and individual circumstances. Plan documents control the benefit; coordinate implementation with your HRA administrator and tax or legal advisers. Please use the contact form for general questions, not medical records or employee Social Security numbers.