How Should Pilots Use Their Accounts? HRAs, Deferred Comp, Cash Balance Plans, and ESPPs

The first one, let's talk about these health accounts that are not, they're similar to an HSA, but you cannot directly contribute to them, okay? And so what we're talking about is these HRAs and RHRAs, that's a mouthful, okay? It's available both at United and American.

American goes, there's the health reimbursement arrangement or the retiree health reimbursement arrangement.

And how this works, these are investment accounts for your health costs.

Like I said, they're similar to your HSA, so you put money in them, where in this case, American puts money in it for you, and then you get to use that money.

And as long as you use that for qualified medical expenses, you don't end up paying tax on that.

Now, with American, it is connected to a specific health care plan, the PLUS plan specifically.

So if you're on the PLUS plan, you're not going to be eligible for an HSA, which we covered in our previous episode there.

But American will give you $500 a year towards your health reimbursement arrangement, which you can use when you're active.

And then each year, they're also going to give you $1,000 per year to go towards your retiree health reimbursement arrangement.

And so you think about that, you're probably using the $500 year by year, but then the $1,000 that gets scooted over to the retiree health account, that you're not going to be able to touch until you retire or you separate from the company.

It's an interesting use case because that $1,000 can accumulate interest and compound.

And let's say that you're somebody who lets your sick bank, you don't use a lot of sick time.

Okay, so maybe your sick bank accrues Now, at American, when you retire, you have an option.

You can do the buyback of your sick bank or you could transfer up to $200,000 into your retiree health reimbursement arrangement.

So let's assume that you're retired military and you've got some type of TRICARE coverage since you've retired and American is your second career and you've never been eligible for the HSA while you've been at American.

I mean, you're probably going to be light.

You're not going to have any agency funds at all unless your spouse was eligible and you guys did separate health care.

But that may not make sense, especially if you have TRICARE.

So anyway, let's assume that you're light on health care funds, designated health care funds.

So when you retire, you can take that $200,000, you could move it to the retiree health reimbursement arrangement, and then you can use it throughout retirement on health care costs and never pay taxes on those dollars as long as it's qualified.

That's pretty huge because your alternative is when you get to retirement, you could cash out your sick bank, you could pay taxes on the money that you cash out, and then you can use a portion of it, the after-tax portion, which is going to be smaller on healthcare costs.

So you decide, you choose which one makes the most sense for you.

Fidelity does an annual study on healthcare costs.

And for 2026 numbers, for a 65-year-old married couple, their 2026 estimate on what you would spend Throughout your retirement, it was $371,000.

So you can see how, hey, if you have a sick bank that's worth up to $200,000 and you can scoot that over to your retiree health reimbursement arrangement at American, not pay any taxes on that account, how that could be extraordinarily valuable to you.