HRA vs FSA

[Guest cshade]

Is there any benefit to an ER setting up an FSA as opposed to an HRA for employer funding only? Employees will not be contributing at all. My feeling is that if its ER funds only, the plan should be set up as an HRA, but I don't know if this is correct. Any thoughts are appreciated.

[Guest John14]

If you have an FSA and use it as a defined benefit plan, you will always have the flexibility to make it a defined contribution plan also - but you may already addressed this in the question.

With an HRA you will be able to choose whether to roll over balances into the new plan year. FSA - use it or lose it.

Elections are immediately available on day one with an FSA. With an HRA you can control how much of the funds are available (e.g., 1/12 per month).

[leevena]

Excuse my confusion about the answer...I may be re-stating this.

The most significant difference between a FSA that your employer should consider is how the left-over funds flow. In an FSA you have a use it or lose it rule at the employee level. The funds are kept in the plan. With the HRA the employer gets to keep the unused amounts. Also, as a side note, the employer does not even need to fund the HRA until the expense comes due.

Personally, I would take the HRA route.