Questions about HSAs and HRAs?

There is a wonderful article on the eHealth website. Here is my synopsis of the article to give you the basic points to understand.

An HSA is a health savings account that is owned by an employee. An HSA allows employees to pay medical expenses with pre-tax dollars. These expenses include hospital stays, doctor’s visits, medications, vision, and dental care. They are similar to an IRA but for health bills. Both the employee and the employer contribute to the HSA. NOTE: the employee must be enrolled in a high-deductible health plan. Also, The IRS sets annual maximum contribution limits for HSAs. HSAs can help accumulate funds over time, as the money accumulated sometimes may be invested.
There are several advantages to an HSA. Because the account is owned by the employee, the account is portable; it goes with the employee if he changes jobs. HSAs offer tax-free withdrawals , tax-deductible contributions, and tax-free growth for qualified medical expenses. The employee can pull money directly from his HSA to pay for medical costs.

Now let’s understand what is an HRA. It is a health savings arrangement between an employer and an employee. This arrangement is solely owned AND FUNDED by the employer. Employees do not have to have any specific health insurance plan. There are advantages to this arrangement. There is no set annual maximum contribution the employer can make. This type of arrangement affords tax breaks to both the employer and the employee. The employer can deduct contributions to HRAs as a business expense, and the employee doesn’t pay income tax on the HRA funds used for qualified expenses. HRAs are generally designed for more immediate healthcare needs.