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Can business owners participate in an HSA, FSA, or HRA?

Lively · January 30, 2019 · 4 min read


There is nothing worse than a surprise medical expense your health insurance doesn’t cover. Luckily, there are IRS-approved accounts to save you from some of these financial landmines. Employees may have access through their workplace. As a small business owner, you may wonder how to get in on the action. Here’s a look at three popular plans and what will get the government’s stamp of approval.

What is the difference between an HSA, FSA, and HRA?

Before diving into the specific rules, it’s helpful to understand three of the most popular plans — HSAs, FSAs, and HRAs — and what makes them different.

Health Savings Account (HSA)

Health savings accounts (HSAs) are a special account for medical expenses. If you have an eligible high-deductible health insurance plan, you can set pre-tax money aside, up to an annual limit. If you decide to invest the balance, it can grow tax-free. When you use the funds for qualified medical expenses, you won’t pay any penalties and fees.  

Portability is one of the biggest HSA perks. You own the account and can take it when you change jobs. Because there is no deadline to use the money, it’s possible to accumulate a sizeable balance over many years. It’s also possible to establish one on your own (you will see why this matters later!)  

Flexible Spending Account (FSA)

A flexible spending account (FSA) is a group health plan. Like an HSA, you can set aside a limited amount of pre-tax money every year. When it’s time to pay for qualified medical expenses, you can reimburse yourself with your FSA money.

Account ownership and deadlines are among the biggest differences between HSAs and FSAs. Your employer owns the FSA and there is a strict “use it or lose it” rule every year.

Health Reimbursement Arrangement (HRA)

A health reimbursement arrangement (HRA) is another type of group health plan. Although you have less control, the tax benefits are similar to the other plans. Your employer owns and funds it and there are no contribution limits. The balance may roll over from year to year, but you can’t take it with you when you change jobs. Like HSAs and FSAs, you can only use the tax-free funds for qualified medical expenses.

Can I participate in these plans as the small business owner?

As a business owner, it’s understandable why you would want to enjoy the tax benefits of these plans. But whether you can do it depends on your business structure. According to the IRS, you won’t be eligible for these company plans if you are “self-employed.”

  • Sole Proprietorship – When you are a sole proprietor, you and your business are one legal entity. The IRS doesn’t see a distinction between you and the business, so you don’t qualify as an employee. This is why sole proprietor business owners can’t take part in their company’s FSA or HRA.  

  • Partnership – A partnership is like a sole proprietorship with more than one owner. The business isn’t a separate legal entity. Because partners aren’t employees, they can’t use the company’s FSA or HRA either.

  • S-Corporation (S-Corp) – Like sole proprietors and partnerships, S-Corps are another type of pass-through entity. This is a fancy way of saying the company’s profits and losses pass through to the owners’ personal tax return. Because of this, S-Corp owners don’t make the cut as employees and aren’t eligible for their company’s FSA or HRA.

  • C-Corporation (C-Corp) – If your company is a C-Corp, the business is a separate legal entity. In the eyes of the IRS, you may enjoy the same tax benefits as W-2 employees. Therefore, you are eligible for the company’s FSA and HRA.

Why health savings accounts (HSAs) are different

As you have learned, being a W-2 employee is key to participating in your company’s FSA or HRA. But even if you aren’t a C-Corp, it’s still possible to enjoy some of your HSA’s tax benefits. If you have an HSA-eligible health plan, you can contribute to an HSA. It won’t be through your company’s payroll — so it’s after taxes — but you can still enjoy future tax-free growth and withdrawals.



Lively is the modern HSA experience built for—and by—those seeking stability in the ever-shifting healthcare landscape. By harnessing modern innovation and deep industry expertise, Lively is committed to bridging today’s savings with tomorrow’s unknowns. Unlike traditional institutions hindered by bureaucracy, Lively’s commitment extends beyond initial set up to providing dedicated, ongoing support and education for every step. So each HSA can reach its maximum potential with minimal headache.

piggy bank on pink background


2023 and 2024 HSA Maximum Contribution Limits

Lively · May 16, 2023 · 3 min read

On May 16, 2023 the Internal Revenue Service announced the HSA contribution limits for 2024. For 2024 HSA-eligible account holders are allowed to contribute: $4,150 for individual coverage and $8,300 for family coverage. If you are 55 years or older, you’re still eligible to contribute an extra $1,000 catch-up contribution.

comparing hsa versus fsa


What is the Difference Between a Flexible Spending Account and a Health Savings Account?

Lauren Hargrave · February 9, 2024 · 12 min read

A Health Savings Account (HSA) and Healthcare Flexible Spending Account (FSA) provide up to 30% savings on out-of-pocket healthcare expenses. That’s good news. Except you can’t contribute to an HSA and Healthcare FSA at the same time. So what if your employer offers both benefits? How do you choose which account type is best for you? Let’s explore the advantages of each to help you decide which wins in HSA vs FSA.

Benefits of HSA employer matching

Health Savings Accounts

Ways Health Savings Account Matching Benefits Employers

Lauren Hargrave · October 13, 2023 · 7 min read

Employers need employees to adopt and engage with their benefits and one way to encourage employees to adopt and contribute to (i.e. engage with) an HSA, is for employers to match employees’ contributions.

Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.



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