How Does an HSA Work With Your ICHRA?

HSAs and ICHRAs can be used in tandem, but it's important to understand a key compatibility requirement.

The Core Rule

To contribute to an HSA, you must be enrolled in an HSA-eligible High Deductible Health Plan (HDHP). Your ICHRA doesn't inherently affect your HSA eligibility — eligibility is determined by the individual health plan you select.

How It Works

If you use your ICHRA funds to purchase an HSA-eligible HDHP on the individual market, you're permitted to contribute to an HSA. Your ICHRA reimburses your premium costs, while your HSA can be used to cover qualified out-of-pocket medical expenses.

Important Distinction

You can only use ICHRA reimbursements for insurance premiums — not for direct contributions to your HSA. HSA contributions must be made by you, or through a separate employer contribution arrangement.

A Note on Your Employer's ICHRA

If your employer offers you an ICHRA, they can't concurrently offer a traditional group health plan to your class of employees. However, they can choose to make separate contributions to your HSA if they wish.

Summary

Combining an ICHRA with an HSA-eligible HDHP is a viable, tax-advantaged strategy. It allows you to receive premium reimbursements through your ICHRA while also building savings in an HSA, provided your chosen individual plan qualifies as an HDHP.

Have more questions? Don't hesitate to reach out to [email protected] for further assistance.