Health Reimbursement Accounts (HRAs) are employer-funded arrangements that reimburse employees for certain medical expenses. Your employer determines the amount of money available in the HRA, which is typically an amount less than your annual health plan deductible.
HRAs can be a great way to pay for out-of-pocket health care expenses while still working down your deductible, especially if you have a High-Deductible Health Plan (HDHP).
Advantages
HRAs provide a tax-free, employer-funded amount of money for health care expenses. If your employer offers an HRA, it can be a tremendous advantage as you pay out-of-pocket medical expenses. HRAs offer several benefits:
Tax Savings
- Your employer’s contributions to your HRA can be excluded from your gross income, meaning you don’t pay taxes on that money.
- Reimbursements from your HRA are tax-free when used to pay for qualified medical expenses.
Out-of-Pocket Cost Savings
- Often paired with an HDHP, reimbursement from your HRA will make it much easier to meet your deductible while taking advantage of a health plan with lower premiums.
Depending on your employer’s plan, unused amounts in the HRA may be carried forward for reimbursements in later years.
Eligibility
Eligibility requirements are established by your employer. HRAs are typically offered with other health plan coverage, such as a High-Deductible Health Plan (HDHP), to satisfy certain requirements under the Affordable Care Act (ACA).
You may be required to be enrolled in other group health plan coverage in order to participate in the HRA. Certain limitations may apply if you are considered a highly compensated individual at your organization.
HRA Recordkeeping
Typically, you will have to submit receipts and other proof that you spent funds on a qualified medical expense, so make sure you retain your receipts, Explanation of Benefits (EOBs) and other documents.
Related Reading:
HSA, FSA, HRA Comparison Table
HRA Contributions
