A flexible spending account (FSA) is a voluntary, employer-sponsored program for employees to save a portion of their income to be used to pay for qualified medical or dependent care expenses incurred during their benefit plan year. Contributions are tax-free.

HRAs have been referred to by many names over the last few years such as personal savings accounts, personal care accounts, defined contribution plans, or consumer-driven health care plans. The confusion ended in 2002, when the IRS finally issued guidelines for employer-provided medical reimbursement accounts and called it the Health Reimbursement Arrangement, or HRA.

An HSA is a tax-advantaged savings account that belongs entirely to the employee. The concept of an HSA is very similar to that of a 401(k) program—both you and your employees can make tax-free contributions to the account, and money in the account can be invested for tax-free earnings.

The Consolidated Omnibus Budget Act of 1985 (COBRA) requires that employers with at least 20 or more employees in the last calendar year who sponsor group health plans, offer employees and their families the opportunity for a temporary extension of health coverage (called “continuation of coverage”).