Can I have an HRA and HSA simultaneously?

As consumer-directed healthcare (CDH) accounts become more popular, people want to know how to make them work best. I’m often asked if someone can simultaneously have an HRA and an HSA.

The answer is yes, but you have to meet specific requirements. Before we get to that, let’s take a quick look at these two accounts.

HRAs and HSAs help people pay for out-of-pocket medical expenses for themselves and their families through set-aside funds. They also provide participants, or healthcare consumers, more control over their healthcare decisions. As a healthcare consumer with an HRA or HSA, you can choose how to use your benefits best.

Side-by-side comparison

Funding Employer only Account owner (others may contribute)
Owned by Employer only Employee
Eligible expenses Employer chooses from among IRS-approved expenses IRS-approved expenses
Eligibility requirement Depending on type of HRA, may have to be enrolled in company health plan Must be enrolled in a high deductible health plan (HDHP)
Tax benefits Employer receives tax benefits on contributions Participant gets tax-free:

  1. Contributions
  2. Interest and earnings
  3. Withdrawals for eligible expenses
Transferable/Portability No Yes
Use in retirement Depends on plan setup Yes
Rollover Depends on plan setup Yes

Can I have an HRA and HSA at the same time?

As I mentioned earlier, you can have an HRA and HSA simultaneously. You can enroll in an employer-sponsored HSA if your healthcare plan is an HSA-qualified HDHP.  At the same time, you can enroll in an HRA if it meets one of the conditions below, per IRS regulations.

  1. Limited Purpose HRA: Pays only for limited expenses such as vision and dental, eligible insurance premiums, and preventative care – costs that don’t count against your HDHP deductible.
  2. Post-deductible HRA: Covers only medical expenses or preventative care incurred after you meet your minimum annual HDHP deductible.
  3. Retirement HRA: Covers eligible expenses only after retirement. Up until retirement, you can make contributions to your HSA.
  4. Suspended HRA: Before the HRA coverage starts, you can elect not to receive reimbursement for expenses incurred during a certain period. While the HRA is suspended, you’re HSA-eligible. The suspension does not apply to eligible expenses, insurance premiums, or preventative care.

For further guidance, contact your benefits administrator or consult IRS Publication 969.

HRA and HSAs have great benefits!

If you’re lucky enough to have an HRA and HSA, you can combine the best of two financial tools:

  • HRA: Tax-free employer funds to pay for qualified medical expenses
  • HRA/HSA: Funds can pay for a wide variety of healthcare expenses
  • HRA/HSA: Lower health insurance premiums with an HDHP (all HSA plans are linked to an HDHP, while only some HRA plans are)
  • HSA: Triple-tax benefits
  • HSA: Balances remaining after age 65 retirement can be used for any purpose without penalty

An HRA and HSA can reduce many cost burdens while offering opportunities to build up your retirement savings. Talk to your company’s HR department for more information.