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How to address HRA funds used with both HRA and HSA?

I tried to switch to my company's insurance plan in 2016, with my company also offering an HRA. I told wife to cancel her insurance and HSA, she failed to. We only utilized HRA funds during the year.

I believe both our plans are considered high deductible, making it acceptable to have both and HRA and HSA. The issue I see is that I believe the deductible for the high deductible plan must be met through use of the HSA first, and then anything beyond the deductible can be put on the HRA card. Since we utilized only the HRA funds during the year, I foresee an issue. Am I correct? If so, how should I address this issue?

I believe the only viable course of action would be to ask her HSA administrator to refund all contributions and earnings for the year, as well as her employer's contributions (which would then become taxable wages, since Dec 31st has passed). Is my assumption correct?

Any guidance/suggestions on this issue would be greatly appreciated!

IRS Info Source (?):

1 Reply
Level 15

How to address HRA funds used with both HRA and HSA?

Having the general-purpose HRA disqualifies you from being eligible to contribute to an HSA for any months that you are covered by the HRA.  The HSA contributions are therefore excess contributions that must be corrected before the due date of your tax return in the manner that you indicated.

See IRS Pub 969 pages 4 and 7:  https://www.irs.gov/pub/irs-pdf/p969.pdf

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