Health Reimbursement Accounts (HRAs) are funded completely by employer contributions. These employer contributions are generally excluded from your gross income, essentially making it tax-free money.
The contribution amount is typically less than your health plan deductible. Some employers may choose to allow a rollover, which means unused funds from your HRA can be carried over and used in subsequent years.
Unlike Health Savings Accounts (HSAs) or health Flexible Spending Accounts (FSAs), employees cannot make contributions to an HRA.
Most employers with HRAs create notional, or unfunded, accounts for each participating employee and reimburse eligible medical expenses up to each employee’s HRA balance.
HRAs Vary by Employer
Each employer has considerable design flexibility with respect to their HRAs. Your employer will set the maximum reimbursement amount under the HRA, which may vary for different groups of employees.
For example, an employer may decide to have one maximum limit for employees with self-only health plan coverage, and another maximum limit for employees with family health plan coverage. However, employers are generally prohibited from basing contributions on an employee’s age, length of service or compensation.