Limits for FSAs, QSRHRAs, and More

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Flexible spending accounts and health reimbursement arrangements are valuable tools for providing sensible, cost-effective health care benefits to employees. As with all tax-favored benefits, however, the rules can be confusing and the limits change every year. This course will address the basic operational features of these kinds of benefits, what the limits are and how they apply, and the outlook for the future. 


Topics covered will include:

  • How an FSA Works
  • Health vs. Dependent Care FSAs
  • Expenses eligible for payment from FSA money
  • Current and carryover limits
  • The background of QSEHRAs
  • Requirements for employers and employees
  • QSEHRA plan limitations
  • Anticipated future developments
  1. Introduction
  2. Health Savings Accounts (HSAs) 00:07:32
  3. Health Savings Accounts (HSAs) continued 00:08:24
  4. Purpose Of HSA Structure 00:09:23
  5. Tripe Tax Benefit Of HSAs 00:11:59
  6. What An HSA Is 00:11:54
  7. Eligible Individuals 00:14:10
  8. Other Plans Permissible 00:17:53
  9. Prescription Drug Plans 00:20:38
  10. HDHP 00:21:44
  11. Embedded Deductibles 00:24:04
  12. Embedded Deductibles: Examples 00:24:08
  13. Embedded Deductibles: Examples Continued 00:25:03
  14. Allowed First-Dollar Coverage 00:26:10
  15. HSA Contributions 00:27:59
  16. Spouses 00:29:59
  17. Employer Contributions 00:31:49
  18. Funding with IRA 00:33:11
  19. Rollovers 00:34:24
  20. Use Of HSA Proceeds 00:37:59
  21. Use Of HSA Proceeds Continued 00:41:11
  22. Use of HSA Proceeds Continued 00:45:15
  23. Use of HSA Proceeds Continued 00:47:34
  24. Form 8889 00:48:59
  25. HSA After Death 00:50:52
  26. Archer Medical Savings Accounts (Archer MSAs) 00:53:56
  27. Archer MSA Background 00:54:26
  28. Archer MSA 00:56:01
  29. Archer MSA Contribution Limits 00:56:24
  30. Flexible Spending Arrangements 00:58:14
  31. Health FSA Basics 00:59:14
  32. Employer Rules 01:03:26
  33. Health FSA Contributions 01:05:41
  34. Health FSA Distributions  01:11:01
  35. Health FSA Distributions Continued  01:12:52
  36. Often Overlooked FSA Eligible Expenses  01:13:26
  37. Health FSA Qualified Beneficiaries  01:16:08
  38. Qualified Reservist Distributions  01:16:48
  39. Dependent Care FSA  01:17:56
  40. Dependent Care FSA Continued  01:18:24
  41. Dependent Care FSA Continued  01:21:07
  42. Carryover And Grace Period  01:23:05
  43. Individual Coverage Health Reimbursement Arrangements (ICHRAs) 01:25:32
  44. ICHRA Basics 01:28:36
  45. ICHRA Eligible Participants 01:30:16
  46. Qualified Medical Expenses 01:31:21
  47. ICHRA Carryover 01:33:57
  48. ICHRA Vs Group 01:37:23
  49. Who Owns The Account 01:39:36
  50. QSEHRAs 01:41:05
  51. QSEHRAs Eligibility 01:41:27
  52. QSEHRA Contribution Limits 01:42:01
  53. Eligible Employers - ICHRA/QSEHRA 01:42:31
  54. Thank You 01:43:12
  55. Presentation Closing 01:43:22
  • Chuck Borek

    Chuck Borek

    Chuck Borek is a practicing attorney and founder of  the Borek Group, LLC. Chuck is also a CPA, and his background includes  five years as a partner in a public accounting firm. He received his law degree and MBA summa cum laude from the University of Baltimore in 1993, where he was editor [...]

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  • Affordable Care Act 01:25:48
  • Archer Medical Savings Account (MSA) 00:13:37, 00:30:23, 00:34:25, 00:53:56, 00:57:25, 01:25:11
  • COBRA 00:47:48, 01:39:16
  • Dependent 00:16:18, 00:41:24, 01:18:07, 01:30:30
  • Dependent Care Financial Spending Account (DCFSA) 01:17:31
  • Embedded Deductible 00:23:31
  • Fair Market Value (FMV) 00:51:33
  • Flexible Spending Account (FSA) 00:17:54, 00:56:24, 01:04:24, 01:13:40
  • Form 8889 00:48:53, 01:39:43
  • Health Reimbursement Account (HRA) 00:17:56, 00:19:11, 01:25:43
  • Health Savings Account (HSA) 00:07:42, 00:08:46, 00:12:32, 00:21:30, 00:30:38, 00:38:19, 00:46:33, 01:13:01, 01:35:21
  • High Deductible Health Plan (HDHP) 00:08:27, 00:14:11, 00:21:44, 00:25:28, 00:29:40
  • Individual Coverage Health Reimbursement Account (ICHRA) 01:25:32, 01:30:00, 01:37:23
  • Individual Retirement Account (IRA) 00:12:58, 00:33:12, 00:36:17
  • Pre-tax Contribution 00:12:07, 00:31:58
  • Qualified Reservist Distributions 01:16:48
  • Qualified Small Employer Health Reimbursement Account (QSEHRA) 01:41:05
  • Roth IRA 00:33:20
  • Sole Proprietor 01:00:28
  • Subchapter K 01:00:48
  • Tax Cuts and Jobs Act 00:16:32
  • Traditional IRA 00:33:19

Affordable Care Act: The Affordable Care Act, formally known as the Patient Protection and Affordable Care Act, and colloquially known as Obamacare, is a United States federal statute enacted by the 111th United States Congress and signed into law by President Barack Obama on March 23, 2010.

Archer Medical Savings Account (MSA): An Archer MSA is a tax-exempt trust or custodial account set up with a financial institution such as a bank or an insurance company. Contributions you make to the account can be used to pay for healthcare expenses not covered by your health insurance plan.

COBRA: The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss

Dependent: A dependent is a person other than the taxpayer or spouse who entitles the taxpayer to claim a dependency exemption. Each dependency exemption decreases income subject to tax by the exemption amount. Your dependent must be a U.S. citizen, a national, a resident alien of the U.S., or a resident of Canada or Mexico. A dependent can be claimed by one and only one taxpayer in any given year.

Dependent Care Financial Spending Account (DCFSA): Is a pre-tax benefit account used to pay for eligible dependent care services, such as preschool, summer day camp, before or after school programs, and child or adult daycare. It's a smart, simple way to save money while taking care of your loved ones so that you can continue to work.

Embedded Deductible: is a system that combines individual and family deductibles in a family health insurance policy.

Fair Market Value (FMV): The term fair market value is used throughout the Internal Revenue Code among other federal statutory laws in the USA including Bankruptcy, many state laws, and several regulatory bodies. In litigation in many jurisdictions in the United States, the fair market value is determined at a hearing.

Flexible Spending Account (FSA): A Flexible Spending Account (also known as a flexible spending arrangement) is a special account you put money into that you use to pay for certain out-of-pocket health care costs. You don't pay taxes on this money. This means you'll save an amount equal to the taxes you would have paid on the money you set aside.

Form 8889: Use Form 8889 to: Report health savings account (HSA) contributions (including those made on your behalf and employer contributions), Figure your HSA deduction, Report distributions from HSAs, and. Figure amounts you must include in income and additional tax you may owe if you fail to be an eligible individual.

Health Reimbursement Account (HRA): Are employer-funded group health plans from which employees are reimbursed tax-free for qualified medical expenses up to a fixed dollar amount per year. Unused amounts may be rolled over to be used in subsequent years.

Health Savings Account (HSA): A savings account used in conjunction with a high-deductible health insurance policy that allows users to save money tax-free against medical expenses.

High Deductible Health Plan (HDHP): Is a health insurance plan with lower premiums and higher deductibles than a traditional health plan.

Individual Coverage Health Reimbursement Account (ICHRA): Is a formal group health plan that allows organizations of all sizes to reimburse their employees, tax-free, for their individual health insurance premiums and potentially other qualifying medical expenses.

Individual Retirement Account (IRA): Is a form of pension provided by many financial institutions that provides tax advantages for retirement savings.

Pre-tax Contribution: A pretax contribution is one that is made before any taxes are paid on the amount. Pretax contributions are designed to encourage people to save for retirement. An advantage of pretax contributions to retirement accounts is that they can reduce your income tax burden for the current year.

Qualified Reservist Distributions: Is a tax- and penalty-free withdrawal from a qualified retirement plan such as a 401(k) or 403(b) plan. Qualified distributions come with conditions set by the IRS, so investors don't avoid paying taxes.

Qualified Small Employer Health Reimbursement Account (QSEHRA): Allows small employers to provide non-taxed reimbursement of certain health care expenses, like health insurance premiums and coinsurance, to employees who maintain minimum essential coverage, including an individual Marketplace plan. In many states, QSEHRAs allow small employers to provide their employees additional plan choices without managing group health plan coverage.

Roth IRA: A Roth IRA is an individual retirement account allowing a person to set aside after-tax income up to a specified amount each year. Both earnings on the account and withdrawals after age 59½ are tax-free.

Sole Proprietor: A business that legally has no separate existence from its owner. The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts.

Subchapter K: Subchapter K of the Internal Revenue Code of 1954 (sections 701 through 761)1 contains the statutory rules for the taxation of partners and partnerships. Anyone who has tried to gain a working knowledge of these sections will readily agree that one of the most important questions about subchapter K is how one avoids it.

Tax Cuts and Jobs Act: The Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018, Pub.L. 115–97, is a congressional revenue act of the United States originally introduced in Congress as the Tax Cuts and Jobs Act, that amended the Internal Revenue Code of 1986.

Traditional IRA: A Traditional IRA is an Individual Retirement Account to which you can contribute pre-tax or after-tax dollars, giving you immediate tax benefits if your contributions are tax-deductible.

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Frequently Asked Questions

A Flexible Spending Account (FSA) and a Health Savings Account (HSA) are both tax-advantaged tools for covering qualified medical expenses, but they differ in key ways. An FSA is employer-sponsored and does not require enrollment in a high-deductible health plan (HDHP), while an HSA requires HDHP coverage and is individually owned—meaning the balance follows the employee even after leaving a job. FSAs operate on a 'use it or lose it' principle, though a limited carryover or grace period may apply. HSA funds roll over indefinitely and can even be invested for retirement. Contribution limits are set annually by the IRS and differ between account types. Aurora Training Advantage's webinar on FSA and QSEHRA limits provides a thorough comparison with current-year limits and practical guidance on administering these benefits effectively.
A Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) allows eligible small employers—those with fewer than 50 full-time equivalent employees—to reimburse employees tax-free for individual health insurance premiums and other qualified medical expenses. Unlike a group health plan, the QSEHRA doesn't require the employer to select a single insurance product for all employees; instead, each employee can choose their own individual plan and the employer reimburses up to an IRS-set annual limit. Employees must maintain minimum essential coverage to receive reimbursements. QSEHRAs are a compelling option for small businesses that want to offer meaningful health benefits without the administrative complexity of a group plan. Aurora Training Advantage's webinar provides detailed guidance on QSEHRA eligibility, setup, and compliance requirements for employers.
A Dependent Care Flexible Spending Account (DCFSA) is a pre-tax benefit account used to pay for eligible dependent care expenses so that the account holder can work or look for work. Eligible expenses include childcare for dependents under age 13, before- and after-school programs, summer day camps, and adult daycare for dependents who are physically or mentally incapable of self-care. The annual contribution limit is set by the IRS and differs from the health FSA limit. DCFSAs offer significant tax savings by reducing taxable income dollar-for-dollar. However, they cannot be used for overnight camps, tutoring, or kindergarten tuition. Funds generally must be used within the plan year. Aurora Training Advantage's webinar on FSA and reimbursement account limits clarifies eligible expenses, administrative rules, and current contribution limits for benefits administrators.
An Individual Coverage Health Reimbursement Arrangement (ICHRA) is an employer-funded benefit that allows organizations of any size to reimburse employees tax-free for individual health insurance premiums and qualified medical expenses. Unlike a traditional group health plan where the employer selects one plan for all employees, an ICHRA gives each employee the freedom to choose their own insurance from the individual market or exchange. Employers can customize reimbursement amounts by employee class—offering different allowances to full-time versus part-time employees, for example. Employees who receive an ICHRA are generally not eligible for ACA premium tax credits. The ICHRA eliminates many administrative burdens of traditional group coverage while giving employers predictable fixed costs. Aurora Training Advantage's webinar offers detailed guidance on ICHRA design, participant eligibility, and operational compliance.
FSAs operate under a 'use it or lose it' rule—funds not spent by the plan year's deadline are typically forfeited. However, employers may offer one of two relief provisions: a grace period of up to two and a half months into the next plan year during which remaining funds can be used, or a carryover of up to a federally set annual limit into the following year. Employers cannot offer both options simultaneously. Participants should track their balances closely and plan qualifying purchases—prescription eyewear, dental care, medical equipment—before year-end to avoid forfeiture. The specific carryover and grace period rules vary by employer plan design. Aurora Training Advantage's webinar on FSA, QSEHRA, and HRA limits provides practical guidance on managing these accounts and communicating the rules effectively to plan participants.