Smart But Not-So-Obvious Ways to Save Money Using Your Health Reimbursement Account (HRA)

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What is a Health Reimbursement Account (HRA)?

An HRA is a benefit plan that some employers offer to help workers pay their and their families’ qualified healthcare expenses. Unlike a health savings account or HSA, an HRA can only be funded by an employer and doesn’t have to be paired with a high-deductible health plan.

 

With an HRA, employees don’t pay a penny into the account because contributions or reimbursement payments come from an employer who owns the funds. Employees must be covered by a health plan but can purchase any product they wish. They can use HRA funds to pay eligible healthcare expenses and, in some cases, insurance premiums, tax-free, up to an annual limit set by the IRS or the employer.

Therefore, you can only have an HRA if your employer offers one or you’re self-employed with at least one part- or full-time W-2 employee. But you can’t have an HRA if you’re a solopreneur with no employees other than yourself. I’ll review my HRA setup, which may also work for you, in a moment.

A company can offer an HRA in combination with a group health plan or as a stand-alone benefit. For instance, if you run a small business, you may give employees an HRA instead of a health plan. The HRA would reimburse workers, up to your set limit, for their qualified healthcare expenses.

Employees can also have an HRA with other medical savings plans, like a flexible savings account (FSA). In some cases, you can have an HRA and an HSA. I’ll briefly cover using an HRA with other savings plans.

Enrolling in an HRA can also affect your ability to qualify for a premium tax credit under the Affordable Care Act (ACA) if you purchase health insurance on a federal or state marketplace. It depends on the type of HRA you’re offered, how much your employer reimburses, your income, and family size. Learn more about getting a subsidy with an HRAopens pdf file.

You can also listen to Laura’s episode about the differences between a sole proprietorship and an LLC by clicking in the player below: 


How do you spend funds in a health reimbursement account (HRA)?

Employers decide how workers can access their HRA funds. In many cases, you pay eligible healthcare expenses upfront and then submit them for reimbursement on a monthly or quarterly basis up to an annual limit. Once approved, your employer cuts you a check or sends a direct deposit to your bank account.

Some employers fund your HRA at the beginning of the year and issue a debit card for you to pay qualified healthcare costs up to your annual benefit limit. 

However, unlike an HSA, an HRA isn’t a bank account where you earn interest or invest the balance. You can’t cash out an HRA, even if you don’t use it all by the end of the year. Its only purpose is to hold the funds provided by your employer to spend on eligible healthcare. 


What are the tax benefits of a health reimbursement account (HRA)?

The beauty of an HRA is that the funds you receive from your employer aren’t included in your gross taxable income. In other words, you don’t pay any federal income or employment tax on HRA funds, which is a terrific benefit!

I employ my husband to work part-time in my business and offer him an HRA as part of his compensation. He submits our family healthcare expenses, including mine, to my business for a monthly reimbursement. My company can claim a tax deduction for the reimbursements, and my husband is paid tax-free income from my business.


What expenses are HRA-qualified?

The expenses you submit for reimbursement or pay using an HRA must have been incurred on or after the date you enrolled in the HRA. Qualified healthcare expenses are generally the same as those that qualify for a medical tax deduction. They include amounts not covered by your health insurance, such as your deductible and copayments. 

Some expenses you can use HRA funds for include:

  • Doctor visits
  • Dental care
  • Vision care
  • Prescription glasses, sunglasses, and contact lenses
  • Hospital expenses
  • Prescription drugs
  • Over-the-counter medicines
  • Menstrual care products
  • Chiropractic care
  • Psychotherapy
  • Substance abuse treatment
  • Transportation to get healthcare

You can learn more about qualifying healthcare expenses in IRS Publication 502, Medical and Dental Expensesopens pdf file.

Unlike with an HSA, you can use HRA funds to pay premiums for insurance like health, dental, and vision, depending on your HRA type, which I’ll review in a moment. You can even get reimbursed for amounts paid for long-term care insurance. 

However, an HRA does not cover expenses like gym memberships, childcare, teeth whitening, and cosmetic procedures. Using it for non-qualified expenses means they are added to your gross income for the year. For instance, if you spend HRA funds on vacation or groceries, you must pay income taxes on those amounts.

Note that if you continue employer-sponsored health insurance through COBRA after you leave a job, you can still use HRA funds for premiums until your coverage ends. But generally, if you leave your employer with unused funds in an HRA, they own and keep the money. 

You might also be interested in episode 439 of Money Girl, where Laura explains what COBRA continuation coverage is, who’s eligible for it, and how to apply and shop for health insurance at the lowest possible price after you leave a job. Listen in the player below as you read on: 


Different types of health reimbursement arrangements (HRAs)

Here are three types of HRAs available to different employers:

  1. Qualified small employer HRA (QSEHRA):

    This plan is for employers that don’t offer a group health plan with fewer than 50 full-time employees. However, employers may exclude certain classes of workers, such as seasonal or temporary employees, if they wish.

Workers can receive reimbursements for their individual health plan premiums and qualified out-of-pocket healthcare costs up to an annual limit set by the IRS. For 2024, the QSEHRA limit is up to $6,150 per employee or $12,450 per employee with family coverage.

Employers can allow unused QSEHRA balances to be carried forward to the next plan year up to an aggregate limit. 

  1. Individual coverage HRA (ICHRA):

    This plan is for employers of any size. It can reimburse employees for their individual health insurance premiums and qualified out-of-pocket healthcare costs with no maximum.

However, if an employer also offers a health plan, workers can enroll in the insurance or the ICHRA, but not both benefits. Employers can set different monthly allowances based on specific employee classes, such as full-time, part-time, and seasonal.

Employers can allow unused ICHRA balances to be carried forward to the next plan year up to an aggregate limit. 

  1. Group coverage HRA (GCHRA):

    This plan supplements an employer-sponsored group health plan. Employees receive reimbursements for qualified out-of-pocket healthcare costs their health plan doesn’t fully cover, like deductibles and copays, but not for plan premiums (including those purchased on the open market). 

Like ICHRAs, GCHRAs have no maximum contribution limits, and employers can set different allowances based on employee classes. 

These aren’t the only types of HRAs, but they may be the most common. You can learn more about HRAs in IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plansopens pdf file.


What are the rules for using an FSA and an HRA?

Some companies may offer workers additional tax-advantaged benefits, such as a flexible spending arrangement, also called a flexible spending account or FSA, in addition to an HRA. However, having an HRA can affect your eligibility for other tax-advantaged accounts, so it’s essential to understand how they work together. 

An FSA can only be offered by an employer; however, it’s primarily funded using an employee’s pre-tax income. Employers can also contribute to an FSA, but they aren’t required to.

You put funds into an FSA that you plan to use for out-of-pocket healthcare and childcare expenses for you and your family. However, you can’t use it to pay health insurance premiums.

If you participate in an FSA for 2024, you can contribute up to $3,200 through payroll deductions, regardless of your marital or tax filing status. Your contributions won’t be subject to federal income or payroll taxes, which is terrific.

However, a downside of FSAs is that you generally must spend all the funds within the plan year unless your employer offers a short grace period or a small carryover amount to use in the following year. After the year or grace period, you lose leftover funds in an FSA. So, you don’t want to contribute more than you’re sure you’ll spend on qualified expenses.

You can pair an HRA with an FSA; however, qualified expenses must be paid from the plan that the employer designates as primary. Once depleted, the second plan can cover eligible expenses.


What are the rules for using an HSA and an HRA?

If you are enrolled in an HSA-qualified, high-deductible health plan, you can contribute pre-tax funds to a health savings account (HSA). You can then spend the funds tax-free on various healthcare costs; however, you can’t use them for health insurance premiums. However, you can spend HSA funds on COBRA, Medicare, and long-term care insurance.

While an HRA is employer-funded and owned, you own an HSA, even if you get it through work. While an employer may contribute to your HSA, you own the account and can take it with you if you leave your job.

For 2024, you can contribute up to $4,150 to an HSA if you have an individual health plan and up to $8,300 for a family plan. If you’re over 55, you can contribute an additional $1,000.

One advantage of an HSA is earning interest and having the ability to invest the balance. Plus, unlike an FSA, there’s no spending deadline. 

You can have an HRA and an HSA simultaneously; however, there are strict rules regarding their use together. The main point to remember is that you can’t double-dip by paying for an expense with an HSA and submitting it for an HRA reimbursement. 

While it gets complicated, some HRAs don’t allow you to contribute to an HSA if they reimburse you for healthcare expenses. The idea is that it could be too easy to double up on the tax benefits of both accounts. 

However, some HRAs allow you to opt out of reimbursement for healthcare expenses but keep the reimbursement for insurance premiums. That works well with an HSA, which can never be used for premiums (unless you’re unemployed). 

So, if your employer offers an HRA and you purchase an HSA-eligible health plan, be sure you understand what’s allowed before using an HSA. If you have to choose between an HRA and an HSA, always use the account that is likely to give you the largest tax savings. If your employer reimburses more than your HSA contribution limit, you’ll probably get more savings by enrolling in an HRA.

This article originally appeared on Moneygirl.com and was syndicated by MediaFeed.org.

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Luxurious Retirement Communities That Make Retirement Feel Like Vacation

Luxurious Retirement Communities That Make Retirement Feel Like Vacation

You’ve worked hard, and now it’s time to live the luxury retirement lifestyle you’ve wanted. Imagine waking up each morning to stunning views of the mountains or the ocean. Perhaps you’ll spend your days lounging by the pool or taking walks through impeccably landscaped gardens.

If this sounds like retirement heaven to you, consider moving to one of America’s most luxurious retirement communities.

From picturesque settings in the countryside to vibrant city neighborhoods, there’s a perfect setting for every senior. And these are the most luxurious retirement communities in America.

Here are some of our favorites.

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If you’re looking for a luxurious retirement community in the Tucson area, The Preserve at SaddleBrooke is worth considering.

One can find the SaddleBrooke in the northwest suburban area of Tucson. This community is age restricted, and residents must be at least 55 of age.

You can find it on the scenic slopes of the Catalina Mountains; this community offers residents stunning views and plenty of opportunities for outdoor recreation.

The Preserve is also home to a world-class golf course and an award-winning spa. If that’s not enough, there are also plenty of social activities available, so you’ll never be bored.

The community offers refined amenities and upscale homes, making it one of Arizona’s most luxurious retirement communities.

robson.com

This Del Webb retirement home is the Village at Deaton Creek in Hoschton, Georgia. It has a 35,000 square-foot clubhouse that is the center of the community.

This 55+ community has many amenities to keep residents busy, including a state-of-the-art fitness center, an indoor and outdoor pool, tennis courts and a walking trail.

The facility offers a variety of recreational activities and amenities for residents, including a spacious swimming pool with a resort-style bathhouse and an art room. Residents can also participate in organized day trips to Atlanta’s downtown area.

It has around 1,100 houses costing anywhere from the upper $200,000s to the mid $600,000s.

Village at Deaton Creek / YouTube

Atria West 86 is a luxurious apartment complex on the Upper West Side of New York City. It’s one block from Riverside Park and in an area known for its extravagance.

This luxurious retirement complex is ideally situated and all-inclusive. Designed with luxury in mind, this beautiful Manhattan residence makes it simpler for older New Yorkers to live in the city’s artistic and cultural center.

Residents may dine from breakfast through late at night, with table service, 24-hour doorman and concierge, housekeeping and linen services available around the clock. Yoga, pottery classes, guest speakers and writing workshops are among the other activities offered.

Suppose you crave access to the finest accommodations in this country’s most glamorous city. In that case, you cannot miss community. The apartments in this luxurious retirement facility starts at $7,500 a month.

atriaseniorliving.com

Dell Webb Sweetgrass offers a multi-million-dollar, state-of-the-art amenity center, indoor and outdoor pools, fitness center, walking trails and many outdoor facilities. Additionally, you’ll discover 500 acres of land representing 1,500 home sites.

Prices range from the low $200,000s to the $400,000s.

Residents may meet their nature requirements by walking miles of pathways and other outside amenities.

The 27,000-square-foot clubhouses are located in the center of the facility and contain a variety of facilities, including gaming and dining areas and socializing areas for residents.

mysweetgrass.net

The Sun City Hilton Head retirement community is in Bluffton, South Carolina, part of the Del Webb chain. It’s the most significant active retirement facility for seniors in the Lowcountry region.

The community’s centerpiece is an amenity campus with dining, swimming, game areas and socializing areas.

This community has won multiple awards for being a great place to live an active lifestyle. It has more than 9,000 homes, making it one of the largest age-restricted communities in the state.

The cost of living here is a bit higher than average, with homes prices ranging from the mid-$200,000s to well over $1 million.  

There are seven-and-a-half miles of walking and biking trails with views of local swamps and three modern fitness centers. If you are looking for a retirement community with plenty of activities to keep you busy, this is your place.

Sun City Hilton Head / Facebook

If you’re searching for a spot to enjoy the SoCal lifestyle in Orange County, Laguna Woods Village is one of California’s most desirable retirement communities.

The community consists of 12,736 homes with more than 18,500 residents. The best part of this community is that you can spend your golden years in a calm environment just minutes from the ocean!

Some homes start in the low $200,000s; however, the most expensive homes sell for over $1 million.

The community has an art center, a theater and a performing arts center. There are also plenty of outdoor activities, like 36 holes of premium golfing, pickleball and bocce ball.

This community is one of the most luxurious retirement communities on the list if you are looking for a retirement community that has it all.

lagunawoodsvillage.com

Lake Providence is a small, gated community near Nashville, with just over 1,000 properties priced from the mid-$300,000s to almost $700,000.

The area was first opened in the late 1830s surrounding Lake Providence.

The resident lifestyle director encourages residents to socialize by organizing community and personal gatherings.

Also, residents have access to swimming, dining, play and a healthy lifestyle within the community, and there are several nearby historical sites to explore.

dwlphoa.com

For active retirees looking for a luxurious place to retire, The Villages has it all, from modest patio villas to stunning four-bedroom residences.

Residents of the community enjoy complimentary access to all golf courses, country clubs and a variety of fitness and recreational facilities.

Several businesses, restaurants and even a performing arts center provide enough to do for seniors who enjoy being busy while still maintaining a high standard of living. The properties start in the high $100,000s and go upwards of $1 million.

If you are looking for a retirement community that is both luxurious and affordable, The Villages can be the perfect place for you.

thevillages.com

Luxurious retirement communities offer seniors a wide range of amenities and services. These communities provide an unparalleled lifestyle, from activities that include expansive golf courses to resort-style pools. In addition, many of these communities offer residents access to world-class healthcare facilities and top-notch dining options.

With so much to offer, it’s no wonder that luxury retirement communities are becoming increasingly popular among seniors. If you are a senior looking for an active lifestyle, these retirement communities are worth considering.

Tips for retirement planning

Need help planning for retirement? You can use free retirement calculators to help you start planning at any age. 

This article was produced and syndicated by MediaFeed.

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