HSA vs. HRA

[Gretel]

Which one would you prefer to recommend to a clients and why? In either case client would pay a substantial amount of the health insurance as well.

[JG EA]

HRA? Do you mean a reimbursement plan like in a corporation?

[S T]

HSA vs HRA

Here is a link to a comparison chart

http://www.bene-care.com/HSA-HRA-FSA.aspx

Sandy

[Koss]

Health Plans

HRA and FSA must be offered by the employer. These plans cannot be established independently by the employee.

BMK

[Gretel]

Thanks to all of you. Yes, I meant employer plans/contributions. The chart is great but I still hope someone on this board has used the either plan and can share with me, why that plan was chosen over the other.

[veritas]

I have an HSA

First because it lowered my premiums. Secondly I can contribute $5800 to the HSA and deduct it on my return. That way I can at last deduct some medical expense on my tax return.


Whatever I don't spend is available for my retirement, which can't come soon enough.

[Mo Sheets]

We have an HSA

My husband's employer has offered the HSA for the last couple of years. We have participated in the HSA with great results (we've been very lucky....relatively healthy!). The benefits of the HSA is that the money goes with you (o.k....technically it is at the named bank in your account) if you leave the employ of the employer. We have built up over $7000 into this account. Typically, most HSA policies will pay for a routine mammogram and annual gynecology visit for woman without having to spend the money in the HSA. I try to tell people it is like having a high-deductible on your car insurance. If you total your car a week after you switch policies, you're going to have some considerable money out of pocket. After about two years, the savings (if no accidents) belongs to you and not in premiums paid to the insurance company.

My husband's employer also set up HRA's to be used when the employee retires. They are going to fund the HRA with $1000 for each year of service. The money in the HRA account will belong to my husband unless he leaves full-time state employment without receiving a normal, unreduced retirement. If he leaves without retiring, the money will revert back to the state to fund future retirees. The funds in the HRA will be able to be used to reimburse the employee for medical, dental, vision, long term care, and supplemental Medicare "premiums." My husband plans to retire in 1 1/2 years with about 23 years of service.

The money in an HSA cannot be used to pay medical insurance premiums. The money in the HRA can be used to reimburse you for premiums paid but there are certain restrictions.

I would talk to your client. Obviously, if they and their family are young and healthy the HSA is a good option. If there are any serious health issues, it becomes very expensive to meet the high deductible year after year.

[Gretel]

Thanks, Mo Sheet, for all the details. My employer-client wants to set up a plan for himself and his employees and asked me for advise which one to choose. I still don't know, even after reading up for hours now.

There is something I don't understand in regards to discrimination rules. I thought a 2% shareholder of an S-Corp. has to follow discrimination rules for anything other than medical insurance. But it doesn't make any sense since all medical payments to S/H need to be included in wages anyway.

Their must be some exceptions to the Fica/Med exclusion rule since in Pub.15-B it says so, but I could not find info what these exceptions are.