The complexities of the healthcare space aren’t for the faint of heart. New regulations pile on top of existing, as new products are added to the healthcare marketplace. These complexities, also create new healthcare and health savings opportunities.
In fact, combining health savings options in complex formats can save both employers and employees money year over year. Imagine paying less for healthcare and having health funds that can grow over the next 20 years. Where can I sign up?
The Scenario: Offer Both an HRA and HSA
Yes, as an employer, you can offer both an HRA and HSA in conjunction with a healthcare plan. We will review the compliance requirement for both employers and employees.
The Lynch Pin: An HSA-Qualified HDHP
Without any other considerations in mind, employers must first offer an HSA-Qualified HDHP. Only eligible employees with an HSA-Qualified HDHP can qualify.
In 2018, HSA-eligible plans that qualify must have minimum deductibles of $1,350 for individuals and $2,700 for families.
With this requirement fulfilled, employees now qualify for an HSA. Employers or employees can contribute up to the maximum in each HSA account. You can read all about 2018 HSA contribution details here.
How to Add an HRA and Still be Compliant
In order to add an HRA (or Health Reimbursement Arrangement) to this scenario and still be compliant, the HRA must be either:
- A post-deductible HRA
- A limited-purpose HRA
Both of these HRAs can’t cover out of pocket expenses before the health insurance deductible is met. Employees can use their HRA funds for these expenses:
- A premium only HRA by definition can cover employee healthcare premiums.
- A limited purpose HSA can cover dental and vision care expenses.
There are two additional costs that the HRA can cover in this scenario:
- Wellness/preventive care
- Long-term care premiums
Neither of these two expenses are HSA qualified expenses. By adding an HRA, employees have more eligible qualified out-of-pocket options, than without one.
Double dipping is not allowed! An employee can’t reimbursement themselves for a healthcare cost with their HSA then claim the same cost with their HRA.
The Results: Health Savings & No Out-of-Pocket Costs
This one-two HSA and HRA punch limits cost for both employers and employees. Employers can offer lower-cost HDHP and by coupling an HSA with an HRA, employees won’t see higher out-of-pocket costs.
Employees also have access to all of the traditional HSA benefits. They can save a healthy nest egg for years to come.
If you need more help with HSA decisions, check out our blog. We will make you a healthcare benefits expert in no time, without any extra work or effort on your end.
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.