A Health Reimbursement Account (HRA), also known as a Health Reimbursement Arrangement, can be a win-win, providing a tax deduction for employers while lowering healthcare costs and offering better coverage for employees.
What is a Health Reimbursement Account?
A Health Reimbursement Account (HRA) Is an employer-sponsored plan that employers establish to help off-set employee medical expenses. HRAs are often paired with high deductible health insurance. All contributions to the HRA are made by the employer.
With an HRA, participants are reimbursed for eligible out-of-pocket expenses, which are determined by the employer and may include co-pays, coinsurance and deductibles, some insurance premiums, dental services, and other expenses as defined in IRS Publication 502. Reimbursements are generally tax-free when used for qualified medical expenses.
Employers contribute a predetermined dollar amount for each employee into the account and the employee has a set amount of time in which the funds may be claimed. The funds are not available until a qualified expense is incurred.
Claim submission requires a claim form as well as supporting documentation, typically the Explanation of Benefit statement that is generated by the health insurance provider.
Health Reimbursement Account (HRA) FAQ
The HRA is an employer sponsored plan and is owned by the employer.
Your employer determines the amount that they will contribute to the HRA each year. The funds do not earn interest.
This depends on the design of the HRA. Please contact Flex Made Easy for this information.
Many HRA plans provide an annual benefit that is available to you in full at the beginning of the plan year.
In other plans, benefits accrue from month-to-month. For example, your plan may provide $1,200 for the entire plan year accrued at $100 each month. You may only be reimbursed up to the maximum amount you’ve accrued at the time of the claim, and reimbursed for the balance of your claim once you’ve accrued more funds.
Contact your human resources department for more information about your specific HRA fund availability.
Any remaining funds are retained by the employer.
Yes, the money in your HRA can be used to pay for eligible medical expenses of any family member who qualifies as a dependent on your tax return, provided the dependent is covered by your HRA.
Some plans allow up to 90 days after the end of the Plan Year to request reimbursements. This is known as the claims runout period.
No, funds can only be used for qualified medical expenses as determined by your employer and outlined in IRS Publication 502—Medical and Dental Expenses.