Employer HRA or HSA when prepping for ER?

[Carpediem]

I am currently still w*rking at megacorp but looking to hang up the w*rk shoes in mid 2017. Open enrollment at megacorp just started and I have the option of staying with my HRA plan or going with an HSA plan. I've read about all the long-term benefits of an HSA (e.g., "backdoor IRA") but those high deductibles and MOP amounts scare me. The difference in premium amounts are only around $10-$20 per month.

My DW and I (ages 56 and 57) have no health issues nor a history of anything. I would need to cover 2 kids - ages 25 and 23 - who are also very healthy.

If I RE in mid-2017, I would probably go with an ACA plan (instead of COBRA) - or whatever the ACA replacement is.

Given this info, here are my questions:

1. Is there a way / methodology to evaluate which plan would be best for our situation - HRA or HSA?

2. If I go with HSA and retire in 2017 and there wasn't an HSA compatible plan on the ACA market, what would happen with my HSA?

I'm leaning toward staying with my HRA (and FSA) but I think that's only because that's what I'm familiar with.

Thank you.

 

[Gotadimple]

1. If you stop working, how will you fund your HRA? If you stop working and are not yet age 65 you can continue to fund an HSA.
2. If you believe it is important to pay your medical expenses as you incur them with your HSA and none are available, you can defer spending the HSA funds until you are age 65. At that point, you can use funds to pay for premiums (but not Medicare Part B), plus expenses incurred after you are age 65.

Go to the IRS website and download the HSA booklet for more info about these accounts.

 

[bingybear]

What is your HRA. I had one before that was a debit card to pay my deductibles. I one left, it was zeroed out.

As noted above you can keep funding an HSA if you have a compatible health insurance account. So what happens if you don't find a HSA account after you leave? You can keep the HSA account. However, you can not continue to fund it. If you pre-funded it too much while you were working, then you will have to pay a 6% penalty on the over funded portion, remove the over funding and likely pay a fee to the HSA custodian to cover their procession.

I've not heard the term backdoor IRA for an HSA.. but more often a stealth IRA.

When I RE, I went on COBRA with a HSA plan and funded my HSA. Have you done price comparisons and insurance differences between COBRA and ACA? Might want to do that.

 

[Carpediem]

1. If you stop working, how will you fund your HRA? If you stop working and are not yet age 65 you can continue to fund an HSA.
2. If you believe it is important to pay your medical expenses as you incur them with your HSA and none are available, you can defer spending the HSA funds until you are age 65. At that point, you can use funds to pay for premiums (but not Medicare Part B), plus expenses incurred after you are age 65.

Go to the IRS website and download the HSA booklet for more info about these accounts.

The HRA plan would go away when I retired unless I chose COBRA coverage, which is VERY expensive ($1500-$2000/mth).

Thanks for the info.

 

[Carpediem]

What is your HRA. I had one before that was a debit card to pay my deductibles. I one left, it was zeroed out.

As noted above you can keep funding an HSA if you have a compatible health insurance account. So what happens if you don't find a HSA account after you leave? You can keep the HSA account. However, you can not continue to fund it. If you pre-funded it too much while you were working, then you will have to pay a 6% penalty on the over funded portion, remove the over funding and likely pay a fee to the HSA custodian to cover their procession.

I've not heard the term backdoor IRA for an HSA.. but more often a stealth IRA.

When I RE, I went on COBRA with a HSA plan and funded my HSA. Have you done price comparisons and insurance differences between COBRA and ACA? Might want to do that.

Correct - the HRA plan (a UHC PPO plan) would be zeroed out unless I chose COBRA. Yes, I've compared COBRA and ACA and the premiums are pretty much in the same neighborhood - without subsidies. However, I think I can stay under the cliff enough to receive subsidies.

Thank you.

 

[jonat]

You can't contribute pre-tax to an HSA unless you are in High Deductible Health Plan. The amount you can contribute annually is pro-rated by how many months you were in a HDHP on the first of each month.

Note also that if you are on a COBRA plan, you can't contribute pre-tax to a FSA.