As the popularity of consumer directed healthcare (CDH) accounts rises, people want to know how they can get the most value out of them. When it comes to two pieces of the CDH puzzle, one frequently asked question is, “Can I have an HRA and HSA at the same time?”
The answer is yes, under specific circumstances. Before we get to that, it’s important to take a quick look at these two accounts.
Both Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs) are designed to help people pay for out-of-pocket medical expenses for themselves and their families through set-aside funds. They also provide participants, also known as healthcare consumers, more control over their personal healthcare. As a healthcare consumer with an HRA or HSA, you can choose how, when and where to spend your benefit dollars.
|Funding||Employer only||Account owner (others may contribute)|
|Eligible expenses||Employer decides within IRS-approved expenses||IRS-approved expenses|
|Eligibility requirement||None||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 mentioned earlier, you can have an HRA and HSA at the same time. To qualify for an HSA, you must be enrolled in a qualified HDHP. You also cannot have other health coverage that’s not high-deductible. For an HRA, it must be integrated with a group health plan to be in compliance with healthcare reform.
Once those conditions are met, there are four HRA plan types that are HSA-compatible, per IRS regulations.
For further guidance, contact your benefits administrator or consult IRS Publication 969.
If you’re fortunate enough to have an HRA and HSA, then you’re able to combine the best of both financial tools:
Healthcare is expensive. Having an HRA and HSA can reduce many of the cost burdens, while offering opportunities to build up your retirement savings. Talk to your company’s HR department for more information.