Can you have both an HRA and an HSA?

Yes, you can.  One of our clients who currently offers an HRA wanted to add an HSA to their benefit program.  Before we go into the mechanics, let’s define an HRA and HSA .

An HRA is a Health Care Reimbursement Account which is “funded” solely by the employer.  The account is not actually “funded” but is set up as “pay as you go” to reimburse employee claims.  Employees cannot contribute to an HRA and the reimbursed expenses are not considered taxable income for the employee.  An HRA can only be implemented along side a group health plan – no stand alone HRA’s allowed.

An HSA is a Health Savings Account.  This account belongs to the employee but can be funded by either the employer or the employee or both.  You can only participate in an HSA plan if you have a high deductible health plan.  HSA’s have annual pre-tax contribution limits.  For 2015, the maximum contribution is $3,350 for singles and $6,650 for families.

Here’s the trick to using an HSA when an HRA is available.  Before you can submit expenses for HRA reimbursements, you must meet the minimum annual HRA deductible which is $1,300 single and $2,600 family for 2015.

For example, in 2015 I contribute $3,350 pre tax to my HSA for single coverage.  I have a medical procedure which costs $2,300.  I have to pay the first $1,300 to satisfy the HSA minimum deductible and then I can submit the remaining $1,000 of charges to my HRA for reimbursement.  I am still able to keep the balance of $2,050 in my HSA for 2015.

Although it is a little tricky, it is doable to have both an HSA and HRA work together to maximize your benefits with a tax advantage.

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