Tip # 720 - HSAs or HRAs??

Sunday, June 21, 2026

Tired of hearing about Health Savings Accounts? 

Don’t blame you. Almost done . . . . . . 

As recently noted, employers contributing to HSAs can choose the levels and frequency of contributions, but must treat all employees the same and, once paid out, those employer contributions are owned by the employee.

Health Reimbursement Arrangements (HRAs) are a little different.

We frequently use them to back-fill even higher deductibles than the minimum ($1,700) for HSA eligibility.

ABC Widget Company, for example, would realize ~ $125,000 of premium savings from a $6,000 deductible health plan. 

To ameliorate the employees’ exposure, Widget establishes an HRA to provide tax free (IRS Sec 105/106) employee reimbursement for claims from $1,701 to $6,000 at 80%, but only if/when incurred. (Almost unlimited plan design options; this one would also allow for HSA contributions.)

Worst case scenario? 

If every employee/dependent hit the max, Widget would be out the $125K. Since actual utilization typically runs < 25 % of the max, Widget saves about $94K.

It’s a calculated risk worth taking, considering if Widget bought the $1,700 deductible plan and no one had claims, would the insurer send a refund check? 

That’s not a trick question!