<img height="1" width="1" style="display:none;" alt="" src="https://dc.ads.linkedin.com/collect/?pid=118459&amp;fmt=gif">
Show all

Don't Make This Error if Early Retirees Stay on Your Health Plan

Many schools, cities and counties offer early retirees the option to continue on their group health insurance plan. They may also consider using a High Deductible Health Plan with an HSA (Health Savings Account). However, using an HSA may be a mistake. Here’s why.

While HSA balances can be used into early retirement for eligible health care expenses like deductibles, co-pays, prescription drugs, eyeglasses, dental expenses and other medical expenses, there is one very important thing that it cannot be used for. The HSA cannot be used to reimburse medical insurance premiums prior to age 65. Given that many schools, cities and counties allow employees to retire early, prior to 65, and that retirees have access to more quality health plans than ever before, this is a major drawback.

A better option may be a funded HRA (Health Reimbursement Arrangement). An HRA is very similar to an HSA. Both plans allow employers to deposit funds on behalf of the participant. Both plans are designed so that funds carry over year-to-year. And both plans earn interest tax-free and are used tax-free for qualifying medical expenses. And while both cover eligible health care expenses, many schools, cities and counties across the country have found HRAs to be a better fit than HSAs for their employees due to the fact that the HRA can be used to reimburse retiree health insurance premiums. In fact, eligible HRA premium payments include health, dental, vision and long-term care insurance, as well as Medicare B, C, D and Medicare Supplements. The ability to use accumulated HRA funds tax-free for premiums once retired increases consumerism, bending the claims-related cost curve going forward.

To learn more about why an HRA may work better for you than an HSA, check out our whitepaper.

National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.

Your Guide to ACA Employee Subsidy Notifications
September 28, 2016
Does Imputed Income Affect Your Contributory Life Insurance Plan?
September 28, 2016
Ken Zastrow

Ken Zastrow

Ken Zastrow enjoys establishing a strong rapport with his clients. He believes that education is key in helping them understand their benefit plans. Ken has a strong background in both active and post-employment benefit strategies. As Employee Benefits Consultant at National Insurance Services, Ken is responsible for the overall assessment and management of all an employer’s benefit plans including claim reconciliation, policy changes, renewals, and medical and dental analytics. He is also well versed in compliance, benefit integration, and early retiree benefits. Ken is a licensed health and life insurance agent, working with schools, cities, and counties in the Midwest Region.