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.
|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:
|Use in retirement||Depends on plan setup||Yes|
|Rollover||Depends on plan setup||Yes|
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.
For further guidance, contact your benefits administrator or consult IRS Publication 969.
If you’re lucky enough to have an HRA and HSA, you can combine the best of two financial tools:
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.