How To Make the HSA and HRA Work Together
As HRAs and HSAs grow in popularity, our staff often get questions regarding these two popular options and what they can do with them to maximize their tax savings for their employees and the business. So many want to know, “Can we do an HRA and an HSA at the same time” or “How can we make the HSA and HRA work together?”
The answer is: Yes. Let’s show you how to make the HSA work with the HRAs BASE® has to offer!
Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs) fulfill different functions, but are both valuable, and when put together, can provide the best outcome for both the employer and employee.
The HRA is an employer-funded health benefit plan, or arrangement between employee and employer, that the employer sets and provides an allowance each month that the employees use to purchase qualified health care expenses. To participate, the employee must follow the rules of the HRA.
The HSA is an account owned by the employee that both the employer and employee can make contributions to, helping the participant pay for health care expenses or to save for the future by investing funds to build wealth. To participate, the employee must be enrolled in a High-Deductible Health Plan (HDHP).
HOW TO: Make the HSA work with the Integrated HRA.
The Integrated HRA is for small employers with a group health plan looking to lower the cost of health insurance premiums while keeping the employees’ coverage the same, supplementing their deductible costs.
To make it work, the employees must be enrolled in the employer’s High-Deductible Health Plan (HDHP). With both an HSA and the Integrated HRA, the employees can use their Integrated HRA funds to cover health care expenses not covered by the HDHP and use their HSA for unexpected health care expenses, bigger health care expenses, or save for the future.
HOW TO: Make the HSA work with the QSEHRA.
The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) is for small employers with less than 50 full-time employees, without a group health plan, to reimburse employees for qualified health care expenses.
To make it work, the employee must have HDHP-QSEHRA eligible coverage and employer must adapt the QSE to work with the HSA. With both an HSA and the QSEHRA, the employees can use their QSEHRA funds to purchase their own HDHP and use the money from their HSA to fund the expenses that their HDHP does not cover.
HOW TO: Make the HSA work with the ICHRA.
The Individual Coverage Health Reimbursement Arrangement (ICHRA) is for small employers to provide their employees with tax-preferred funds for qualified insurance premiums and/or qualified insurance premiums and out-of-pocket health care expenses. The employers can choose to offer to all employees, or to a specific class, with no contribution cap.
To make it work, the employee must have HDHP-ICHRA eligible coverage. The ICHRA must be set up to reimburse premiums only for the employee to be eligible to make contributions to their HSA and cannot be used to reimburse premiums AND health care expenses.
When the HRA and HSA are combined, and set up properly, these two health benefits provide employees with the greatest possible assistance from their employer, helping the employer save money and recruit and retain the best employees.
To make an HRA work with the HSA, maximizing the tax savings and benefits, there may be a few adaptations required. Let BASE® create the best custom tax-advantaged benefits package for your business. For more information, call BASE® at 888.386.9680 or visit www.BASEonline.com.
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