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HSA with an HRA

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  • #16
    Lol, thanks for the vote of confidence :-) but I think this is one of those "holes in the system" where there is not a clear answer.  A lot of it will depend on the specific wording of your HRA and how it allows its funds to be used.  Again, I am unsure if it is the wording in the HRA which matters, or how it is actually used (e.g. only submitting for reimbursement post-deductible expenses, or if it must be specified in the HRA that it can only be used as such).

    The biggest key is maintaining your wife as an "eligible individual" pursuant to IRS Pub 969 [link] to enable her to make the full $6,750 HSA contribution for a family.  So as long as she has an HDHP and no other health coverage, another family member is covered by the HDHP, and the HRA either isn't or can't be (again, I can't find a rule which distinguishes it) applied to pre-deductible expenses, then she should maintain her eligibility.  Another key is not providing any benefit before meeting the deductible, since that disqualifies her from the HSA.

    The biggest issue here is that we're dealing with a lack of evidence to the contrary and not a confirmation of evidence to prove the point.  This is why (esp not being a financial professional) that I wouldn't recommend proceeding with the plan to double-dip HSA/HRA below the min deductible of $2,600 because, even though it seems like it ought to work just fine and be a great way to save on taxes while letting your HSA grow, the possibility that it might be illegal and its consequences would intimidate me away from doing it.

    This brings back to mind the guy who was covered by his HMO, but was also covered by his wife's HDHP, and a loophole in defining "eligible individual" and "family coverage" in IRS Pub 969 allowed his wife to make the full family HSA contribution while he was still covered by his HMO.

    How does the IRS even know you've received HRA distributions, though, since there are no reporting requirements on individual income tax return for HRA reimbursements?

    Anyway, here's a reading list for HSAs and HRAs, which is just a bit too far beyond what I've got time for atm (sorry):

    • HSAs and Other Tax-Favored Health Plans, IRS Pub 969: [html] [pdf]

    • Employer's Tax Guide to Fringe Benefits, IRS Pub 15-b: [pdf]

    • Health Savings Account (HSA) - interaction with other health arrangements, IRB 2004-22 [html] (revision of 2002-45 [pdf] which outlines them)

    Again, lack of evidence to the contrary is not evidence supporting the claim.  :shrug:


    • #17
      Thanks so much for your thorough explanation! I will ask for my HRA's literature and see if it provides any additional information. Based on the responses and what I have read, it seems as if I can expense health care bills beyond the $2600 floor, but I'll see if I can find further clarification to provide more certainty.


      • #18
        I have done some reading and called my benefits coordinator and healthy insurance and cannot seem to get an answer for this. My employer does not offer a HSA. They offer a HRA ($500) and a FSA which you can put money into but it is a use or lose it kind of deal at the end of the year. I elected not to use the FSA. My deductible is currently $2000 and OOP max is $4500. We also have a wellness incentive program which pays another $400 towards my deductible.

        Based on this information. From a tax benefit standpoint (legal standpoint too), can I open a HSA? My understanding is that wellness incentives cannot be used to determine if you have a high deductible plan. So, is my deductible $1500?

        If I do qualify to open a HSA, who do you recommend to go with? Thanks for your help.


        • #19
          If your company does not offer an HSA and instead offers an HRA and a FSA it is most likely that you do not have a qualifying HDHP plan to begin. It is not enough that it is an HDHP, it must not reimburse before the deductible has been met. Usually this is in the form of co-pays.

          Even if it was a qualifying HDHP, if the wellness program pays for any services prior to the deductible being met, it would make you ineligible for an HSA. It is also almost certain that the HRA can reimburse before the deductible is met. If that is true, again you would be ineligible for an HSA.

          Even worse, it is quite likely that your HRA can provide coverage to your wife before her HDHP deductible is met. This would mean that she is not an HSA eligible individual and any HSA contributions she has made will be excess contributions and they and any earnings will have to be returned.

          This is a common feature of FSAs causing adverse consequences to the HSA eligibility of a spouse. It is quite likely that your HRA will have the same unfortunate effect.