Washington · Life, Accident & Health SampleInteractive Mind Map
HSAs, HRAs & FSAs
A visual breakdown of HSAs, HRAs & FSAs — one of the concepts you can count on seeing on the exam.
The TESTivity Interactive Mind Mapping Graphic we picked for the Washington Life & Health sample is HSAs, HRAs & FSAs — and this is a concept you can count on seeing on your pre-licensing exam. Get the structure straight once and those questions turn into free points.
So explore it. Click through, see how the pieces relate, and let the layout do some of the remembering for you.
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The HSA is the only account with a TRIPLE tax advantage — in, growth, and out.
Contributions go in pre-tax, earnings grow tax-free, and qualified withdrawals come out tax-free. Nothing else in health benefits does all three.
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1 · Contributions In
Personal contributions are deductible above-the-line (no itemizing); employer contributions are excluded from income.
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2 · Growth Inside
Interest, dividends, and gains grow tax-free — many HSAs allow mutual-fund investing once a balance threshold is met.
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3 · Qualified Out
Withdrawals for qualified medical expenses — deductibles, copays, dental, vision, Rx, even Medicare premiums after 65 — are tax-free.
No “use it or lose it”: unspent HSA funds roll over indefinitely and the account is fully portable — it belongs to the individual, surviving job changes and plan changes.
How they test thisThe HSA’s three legs — deductible/pre-tax in, tax-free growth, tax-free qualified out — are the defining test fact. And the HSA never forfeits unused funds, unlike an FSA.
To fund an HSA you need an HDHP — and the withdrawal rules flip at age 65.
The contribution limit is a combined cap from all sources, and non-medical withdrawals are penalized only before 65.
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Eligibility, Limits & Withdrawals
2024 figures
Must have a qualifying HDHP — 2024 min deductible $1,600 individual / $3,200 family; max OOP $8,050 / $16,100. No other disqualifying coverage; Medicare enrollment disqualifies
Contribution limits: $4,150 individual / $8,300 family, plus a $1,000 catch-up at 55+ — this is the combined cap across employee, employer, and any source
Before 65, non-medical withdrawal: taxable income + 20% penalty
At 65+, non-medical withdrawal: taxable income, no penalty — the HSA acts like a traditional IRA
The trap they setA 58-year-old taking money for a vacation owes income tax plus the 20% penalty — the penalty waiver is for 65+, not 55+. And the contribution limit is a combined total from all sources, not a separate cap for each contributor.
The HRA is the employer’s account — employer-funded only, and the employer keeps what’s left.
It is a promise to reimburse, not a savings account, and it does not follow the employee out the door.
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Employer-Funded Only
The employee contributes nothing. No HDHP required. Reimbursements for qualified expenses are tax-free to the employee.
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Employer Keeps Unused
Unused balances stay with the employer — not a segregated fund, just a reimbursement promise. Not portable; forfeited when employment ends.
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ICHRA & QSEHRA
ICHRA reimburses individual-market premiums and expenses; QSEHRA is for employers under 50 FTEs with no group plan, subject to annual limits.
How they test thisHRA vs HSA: the HRA is employer-funded and employer-owned (unused funds stay with the employer); the HSA is individually owned and rolls over to the employee forever. The HDHP requirement is the HSA’s, not the HRA’s.
The FSA is pre-tax and front-loaded — but it’s use-it-or-lose-it and stays with the employer.
Your full annual election is available on Day 1, even before you’ve funded it — the trade-off for the forfeiture risk.
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Health Care FSA Mechanics
Employer-sponsored, employee-funded
Employee funds it via pre-tax payroll reduction (employer may add); 2024 limit $3,200 per employee (each spouse has their own)
Uniform coverage rule: the full annual election is available Day 1 — before payroll has funded it — unlike an HSA, where only contributions made are available
Use it or lose it: unused funds are forfeited, unless the plan offers a 2.5-month grace period OR a carryover up to $640 (2024)
Not portable — generally forfeited at job change
The trap they setOn January 5, an employee with a $3,200 election and only $110 deducted so far can still submit the full amount — the uniform coverage rule makes the whole election available immediately. And leaving mid-year usually forfeits the unused balance.
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Top Exam Tips — HSA / HRA / FSA
1. HSA triple tax advantage: pre-tax/deductible contributions, tax-free growth, tax-free qualified withdrawals. 2. HSA requires an HDHP; it is individually owned, rolls over forever, and is fully portable. 3. HSA contribution limit (2024) is $4,150 / $8,300 family + $1,000 catch-up at 55+ — a combined cap from all sources. 4. Non-medical HSA withdrawal: tax + 20% penalty before 65; tax only, no penalty, at 65+. 5. HRA: employer-funded only, employer keeps unused funds, not portable, no HDHP needed. 6. FSA: employee-funded pre-tax, $3,200 limit, use it or lose it (grace period or $640 carryover), not portable. 7. Uniform coverage rule: the full FSA election is available Day 1, before it is funded.
Exam vocabulary
Key Terms to Know
HSA (Health Savings Account)
Triple-tax-advantaged, individually owned account; requires an HDHP; rolls over indefinitely; fully portable; funded by employee and/or employer.
HDHP (High-Deductible Health Plan)
Required for HSA eligibility. 2024: min deductible $1,600 individual / $3,200 family; max OOP $8,050 / $16,100.
HSA Contribution Limits (2024)
$4,150 individual / $8,300 family, plus a $1,000 catch-up at age 55+. The cap is the combined total from all sources.
Triple Tax Advantage (HSA)
Pre-tax/deductible contributions, tax-free earnings growth, and tax-free withdrawals for qualified medical expenses.
Non-Medical HSA Withdrawal (Pre-65)
Taxable as ordinary income AND subject to a 20% penalty.
Non-Medical HSA Withdrawal (65+)
Taxable as ordinary income only — no 20% penalty; the account functions like a traditional IRA.
HRA (Health Reimbursement Arrangement)
Employer-funded only; reimburses qualified expenses tax-free; employer retains unused funds; not portable; no HDHP required.
ICHRA
Individual Coverage HRA — reimburses individual-market insurance premiums and qualified expenses; no group plan required.
QSEHRA
Qualified Small Employer HRA — for employers with fewer than 50 FTEs that offer no group plan; reimburses premiums and expenses, subject to annual limits.
FSA (Flexible Spending Account)
Employer-sponsored, pre-tax account; $3,200 employee limit (2024); use it or lose it; full election available Day 1; not portable.
Uniform Coverage Rule (FSA)
The full annual FSA election is available from Day 1 of the plan year, before payroll contributions equal the elected amount.
Use It or Lose It (FSA)
Unused FSA funds are forfeited at year-end, unless the plan offers a 2.5-month grace period or a carryover up to $640 (2024).
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