How do rollover provisions differ between HRAs and HSAs?

The answer that highlights the primary distinction between Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs) is the statement that HSAs allow funds to accumulate over time, while HRAs depend on employer discretion for rollover.

In the case of HSAs, the funds contributed to these accounts not only roll over from year to year without any expiration, but they can also be invested and grow tax-free. This accumulation feature is a significant benefit, allowing individuals to save for future medical expenses, ultimately supporting long-term health financial planning.

On the other hand, HRAs are funded solely by employers, and the ability to carry over unused funds from one year to the next depends on the specific plan design set forth by the employer. Some HRAs may permit rollover, while others may have a "use-it-or-lose-it" provision at the employer’s discretion, meaning that employees might lose unused funds at the end of the plan year if the employer chooses not to allow carrying over.

This fundamental difference in how the funds operate signifies that HSAs generally offer more beneficiary-friendly rules concerning rollover, whereas HRAs can vary widely based on employer policies.