How much of your health premium does an employer-funded HRA actually cover? Compare your ICHRA, QSEHRA, or group-coverage HRA allowance against your real premium, see the monthly shortfall you pay yourself, find out how much of the allowance becomes taxable, and check whether the offer keeps you eligible for an ACA premium tax credit.
A QSEHRA may be designed to pay unused allowance as taxable wages; an ICHRA and a group-coverage HRA must forfeit it.
| Line Item | Monthly Amount | How It's Calculated |
|---|---|---|
| Your monthly premium | $0 | Entered actual premium |
| Employer reimbursement | $0 | min(allowance, premium) |
| Your monthly out-of-pocket premium | $0 | premium − reimbursement |
| Unused allowance (annualized) | $0 | max(0, allowance − premium) × 12 |
| Taxable cash-out (annualized) | $0 | 0 unless the plan pays cash |
Situation: A 12-employee firm offers a QSEHRA of $6,450/year self-only ($537.50/month). Your Marketplace plan costs $560/month and the employer does not cash out leftovers.
Calculation: Reimbursement = min($537.50, $560) = $537.50. Out-of-pocket = $560 − $537.50 = $22.50/month ($270/year). Unused allowance = $0.
Situation: Same $537.50/month QSEHRA allowance but your plan costs only $430/month, and the plan document lets the employer pay the $107.50 difference as taxable cash.
Calculation: Reimbursement = min($537.50, $430) = $430. Unused allowance = $537.50 − $430 = $107.50. Taxable portion = $107.50/month = $1,290/year added to W-2 wages.
Situation: An ICHRA allowance of $400/month, the lowest-cost silver plan in your rating area is $560/month, and household income is 300% FPL.
Calculation: $400 < $560, so the offer is NOT affordable. You keep premium tax credit eligibility and can waive the ICHRA, opt into a Marketplace plan, and claim the subsidy on Form 8962.
Allowance = the monthly employer contribution stated in the plan document
Premium = the actual monthly premium of your individual or group plan
Taxable = unused allowance, and only if it is paid out as cash wages
Affordable (ICHRA) = Allowance ≥ lowest-cost silver plan premium in your rating area
| Plan Year | Self-Only Limit | Family Limit | Eligible Employers |
|---|---|---|---|
| 2025 (published) | $6,450 / year | $13,100 / year | Fewer than 50 full-time equivalent employees |
| 2026 (indexed upward) | Indexed | Indexed | Same <50 FTE rule |
| Monthly equivalent (2025) | $537.50 | $1,091.67 | Allowance must be offered class-wide |
The 2025 figures above are the published statutory limits. The 2026 amounts are indexed for inflation and are announced in an IRS revenue procedure — check the current plan-year number before signing an offer.
| Feature | HRA (incl. ICHRA) | HSA | FSA | QSEHRA |
|---|---|---|---|---|
| Who funds it | Employer only | Employer and/or employee | Employer and/or employee | Employer only |
| 2025–2026 limits | No statutory cap (ICHRA priced by class, up to a 3:1 age curve) | 2025: $4,300 self-only / $8,550 family; 2026 indexed | 2025: $3,300; 2026 indexed | 2025: $6,450 self-only / $13,100 family; 2026 indexed |
| Employee contribution allowed? | No | Yes | Yes (salary reduction) | No |
| Portable? | No — forfeited on job change | Yes — follows you | No — limited carryover only | No |
| Tax treatment | Reimbursements tax-free (IRC 105(b)); cash-outs taxable wages | Tax-free in and out for qualified expenses | Tax-free for qualified expenses | Tax-free up to the limit; excess cash-outs taxable |
| Works with the ACA premium tax credit? | ICHRA triggers an affordability test; a group HRA cannot reimburse individual-market premiums | Yes — HSA use does not affect subsidy eligibility | Yes — FSA use does not affect subsidy eligibility | Yes, if the QSEHRA is waived or the affordability rules are met |
Compare the allowance to the lowest-cost silver plan premium for your age and rating area, not to the more expensive plan you actually want to buy.
If the ICHRA is unaffordable you can waive it and claim a Marketplace subsidy — but only inside the opt-out window or at enrollment.
Store your HRA notice and Form 1095-A. The affordability determination is what your premium tax credit depends on at filing time.
An HRA is an employer-funded account, and the type your employer offers changes what the money can buy and how it interacts with your Marketplace coverage. An ICHRA (Individual Coverage HRA) lets your employer reimburse you for individual-market premiums and qualified medical expenses. It has no statutory dollar cap, but the allowance must be offered on the same terms to an entire class of employees and may be priced by age using a curve no steeper than 3:1. A QSEHRA (Qualified Small Employer HRA) is the older, simpler cousin: it is available only to employers with fewer than 50 full-time equivalent employees, and its 2025 limits are $6,450 for self-only coverage and $13,100 for family coverage, indexed upward for 2026. A group-coverage HRA is the traditional design that reimburses expenses under the employer's own group health plan — it may not be used to reimburse individual-market premiums, so it generally has no effect on your eligibility for a premium tax credit. Crucially, every flavour of HRA is funded entirely by the employer: unlike an HSA, you cannot contribute, and unlike an HSA, the balance is not portable when you change jobs.
The single most important number in an ICHRA offer is not the allowance itself — it is the lowest-cost silver plan premium on the Marketplace for your age and rating area. An ICHRA offer is considered affordable when the allowance you receive is at least that silver benchmark. If the allowance meets or beats it, you are generally not eligible for a premium tax credit, even if the plan you actually want costs more or covers more. If the allowance falls short of the benchmark, the offer is not affordable, and you may decline the ICHRA and claim a subsidy on HealthCare.gov instead.
The confusion between these accounts usually comes down to three questions: who puts money in, can you take it with you, and does it collide with an ACA subsidy? An HRA is employer money only and disappears when you leave the job, but an ICHRA or QSEHRA can reimburse individual-market premiums in a way an HSA and a FSA cannot. An HSA is the only portable account: it is funded by you, your employer, or both, and it follows you between jobs, which is why it pairs so well with a high-deductible plan. A health FSA is a use-it-or-lose-it salary-reduction account with a small carryover option — convenient for predictable dental, vision, and dependent-care-style expenses, but not a long-term savings vehicle. Table rows in the guide tab above set out who funds each account, the published 2025–2026 limits, whether employee contributions are allowed, portability, tax treatment, and how each one behaves under the premium tax credit. In practice most households are choosing between an HSA and an HRA, and the deciding factor is usually whether the employer plan is a high-deductible plan that permits an HSA at all.
⚠️ Disclaimer: HRA allowance and contribution limits are indexed annually and the 2026 figures differ from the 2025 numbers used here. Always verify the current plan-year limits, your employer's plan document, and the lowest-cost silver plan premium for your age and rating area before making a decision. Affordability and premium tax credit rules are complex and can change with legislation. This calculator is an educational estimating tool only and is not tax advice. Consult a qualified tax professional or benefits advisor about your specific situation.