Can I have an HRA and an FSA at the same time?

Written by: Elizabeth Walker
Published on December 19, 2022.

If your employer offers a health reimbursement arrangement (HRA), you have access to a competitive health benefit that empowers you to make your own healthcare choices in ways a traditional group health insurance plan doesn’t.

However, it’s important to understand how an HRA works or doesn’t work with other spending arrangements or accounts, like a flexible spending account (FSA). If your employer offers you an FSA in addition to an HRA, there are special rules to keep in mind to coordinate the two health plans appropriately.

In this blog post, we’ll discuss how HRAs and FSAs are different, why having both can be beneficial, and what regulations you’ll need to keep in mind to coordinate your health spending.

Learn more about how HRAs can work at your organization with our complete guide

What is a health reimbursement arrangement?

An HRA is a formal health benefit that allows employers to reimburse employee participants for individual health insurance premiums and qualifying out-of-pocket medical expenses that employees purchase with their own money.

Reimbursements made through the HRA are tax-free to the organization and can also be tax-free to you as the employee—you just need to have a health insurance policy that provides minimum essential coverage (MEC) for your reimbursements not to be considered taxable income.

HRAs are employer-owned accounts. Your employer will decide how much tax-free money they want to offer you each month to spend on healthcare items. They’ll also determine if your HRA funds can be used to reimburse you for only insurance premiums or other qualified expenses.

Unlike the popular health savings accounts (HSAs), only employer contributions are allowed, and any unused funds at the end of the year generally stay with the employer.

Three popular types of HRAs are:

  • Qualified small employer HRA (QSEHRA)
    • A simple, controlled-cost alternative to traditional health plans for employers with fewer than 50 full-time employees. A QSEHRA can reimburse employees for individual health insurance premiums, out-of-pocket expenses, or both. QSEHRAs are also subject to an annual contribution limit.
    • Note: Keep in mind that if your employer offers a QSEHRA, it can’t be combined with an FSA.
  • Individual coverage HRA (ICHRA)
    • A flexible health benefit that can be used as a standalone health benefit for a business or as an alternative health benefit for employees who don’t qualify for their employer’s group health insurance plan. Like a QSEHRA, ICHRAs can reimburse employees for health insurance premiums, out-of-pocket medical expenses, or both.
  • Integrated HRA
    • Sometimes called a group coverage HRA (GCHRA), an integrated HRA is a group health supplement to help eligible employees cover out-of-pocket expenses that aren’t fully paid for by their group plan. GCHRAs are typically offered alongside a high-deductible health plan (HDHP), though they can be paired with any group policy.

HRAs work for employers of any size and can provide you with affordable health coverage that’s more customized than the one-size-fits-all structure that traditional health plans offer. This flexibility has helped HRAs grow more prevalent in today’s workforce, especially as health insurance costs continue to rise.

What is a flexible spending account?

Next, let’s talk about FSAs. While the “a” in HRA stands for “arrangement,” the “a” in FSA stands for “account.” That’s because FSAs are employer-owned savings accounts that employers and employees can contribute money towards for future tax-free healthcare spending.

Like QSHERAs, FSAs have an annual contribution limit. In 2023, the annual combined limit you and your employer can contribute to your FSA is $3,050. However, if your spouse has a separate FSA under their employer, they can make their own maximum contribution.

FSAs are tied to your employment—just like HRAs—so the account won’t be maintained if you stop working for your employer that initially offered it to you.

Also similar to HRAs, FSA funds are subject to a “use-it-or-lose-it” policy, which means that any unused funds at the end of each plan year go back to your employer. That means that any money you don’t spend by the end of your plan year won’t roll over to the next year. Therefore, it’s best to use all your available money on your out-of-pocket expenses to reap your FSA’s full benefit.

Depending on the type of FSA you’re being offered (healthcare FSA, limited purpose FSA, or dependent care FSA), the medical expenses you’re eligible to purchase with your FSA dollars will vary.

For example, a limited-purpose FSA only covers exempted medical expenses, such as dental and vision expenses, while a healthcare FSA covers a wider range of IRS-approved medical costs. A dependent care FSA covers medical expenses and even childcare for children under 13.

How do HRAs and FSAs compare?

To break down the differences between HRAs and FSAs more clearly, below is a quick comparison chart between the two account-based health plans.

Comparison Point

Health Reimbursement Arrangement (HRA)

Flexible Spending Account (FSA)

What is it?

HRAs are employer-funded, tax-advantaged, health benefit plans used to reimburse employees for eligible medical expenses.

There are three different types of HRAs that PeopleKeep offers: QSEHRA, ICHRA, and GCHRA.

FSAs are employer-established benefit plans that allow for tax-free reimbursement of qualified medical expenses.

What are the eligibility requirements?

All full-time employees with the possibility of including part-time employees. Owner eligibility is dependent on your business entity type.

All employees that aren’t self-employed.

Who owns the account/arrangement?



What is the average employer contribution cost?

Only pay for employee utilization.

100% paid regardless of utilization.

Who can contribute?

Only the employer. The employee can't contribute their own money.

The employee and employer if they choose.

How much can be contributed each year?

Contribution amounts are determined by their employer. However, the IRS does limit QSEHRA annual allowance amounts.

The 2023 annual employer contribution limit for QSEHRA is $5,850 per self-only coverage; $11,800 for family coverage.

Contribution amounts are determined by the employer, but can't exceed the IRS annual limit of $3,050 in 2023.

Is the account/arrangement taxed?

No, it’s tax-free.

No, it’s tax-free.

Is a health insurance plan required?

No. The purchase of MEC allows reimbursements to be received free of income taxes.

However, if employers offer an ICHRA, employees must have a qualifying form of individual coverage.

It depends. A limited-purpose FSA is an excepted benefit and does not require the purchase of insurance.

A health FSA must accompany group insurance to comply with ACA market reforms.

Are medical expenses allowed?

Yes. Unreimbursed medical care expenses as defined by IRC 213(d)1; including health insurance premiums.

Yes. Unreimbursed medical care expenses as defined by IRC 213(d); including health insurance premiums.

Do funds carry over to the next year?

Yes, if determined by the employer. However, the IRS states employers can only allow:

1) Up to a $500 rollover, or

2) a 2.5-month grace period to use funds, or

3) no carry over to next year.

Yes, if determined by the employer.

Who administers the account/arrangement?

Employer or a third-party administrator (TPA).

Employer or a third-party administrator (TPA).

Is the account/arrangement portable after the termination of employment?

No. The account cannot be maintained if the employee is no longer working for the employer.

No. The account cannot be maintained if the employee is no longer working for the employer.

How do HRAs and FSAs work together?

If your employer is offering you both an HRA and an FSA—great! Using both is an excellent way to maximize the employer contributions to your healthcare, optimize your tax savings, and save even more on your medical services and other out-of-pocket expenses, such as your prescription costs.

When using both an HRA and an FSA, you’ll want to keep the following special rules in mind:

  • The same eligible expense can’t be paid for from both accounts.
  • Unless otherwise specified in your employer’s plan documents, your total HRA allowance must be used first before you can dip into your healthcare FSA.
    • This makes it more likely that any unused balance in your FSA will be forfeited at the end of the year. So your employer can opt to change your plan documents to allow FSA funds to be used first on medical expenses.

The only HRA where employers can't offer an FSA in addition to their HRA is with a QSEHRA. According to the IRS, a QSEHRA can't be combined with any other traditional health plan. In this case, an FSA is considered a group health plan.

However, if you’re using an FSA from a spouse (not one offered by your employer), you can coordinate it with your QSEHRA. Just make sure you're following your plan documents and the rules above to stay compliant.


When you look at your benefits package, you may see several different types of health coverage and employee benefit plans to pick from. But it's important to know that you may not have to pick just one.

Using an HRA and an FSA together is a smart way to take advantage of your employer health benefit plans, and it allows you to access more tax-free money for the qualifying expenses you incur for you, your spouse, and your children.

When considering HRAs and FSAs, understanding how they work together can get complicated. But by following the guidelines in this blog article, you’ll be ready to use both benefits like a pro!

This article was originally published on August 16, 2021. It was last updated on December 19, 2022.


Originally published on December 19, 2022. Last updated December 19, 2022.


Additional Resources

View All Resources