How Employees Benefit from HRA
- Contributions made by your employer can be excluded from your gross income.
- Reimbursements are pre-tax if you pay qualified medical expenses.
Qualifying for an HRA
- Health Reimbursement Arrangements - HRA - are employer-established health benefit plans. These may be offered in conjunction with other group health plans. Employers have complete flexibility to offer various combinations of benefits in designing their plan. Employees do not have to be covered under any other health care plan to participate.
- Self-employed persons are not eligible for an HRA.
- Certain limitations may apply if you are a highly compensated participant.
Contributions to an Reimbursement Arrangement
HRAs are funded solely through employer contributions and may not be funded through employee salary deferrals under an FSA - Cafeteria Plan. These contributions are not included in the employee's income. You do not pay federal income taxes or employment taxes on amounts your employer contributes to the HRA.
Amount of Contribution to HRA
There is no limit on the amount of money your employer can contribute to the accounts. Additionally, the maximum reimbursement amount credited under the HRA in the future may be increased or decreased by amounts not previously used. See Balance in an HRA, later.
Distributions From an HRA
Generally, distributions from an HRA must be paid to reimburse you for qualified medical expenses you have incurred. The expense must have been incurred on or after the date you are enrolled in the HRA. Debit cards, credit cards, and stored value cards can be used to reimburse participants in an HRA. You may not use HRA debit cards at stores with the Drug Stores and Pharmacies merchant category codes unless the store meets certain requirements or you provide certain additional information.
Reimbursements under an HRA can be made to the following persons.
1. Current and former employees.
2. Spouses and dependents of those employees.
3. Any person you could have claimed as a dependent on your return.
4. Spouses and dependents of deceased employees.
Qualified Medical Expenses for Health Reimbursement Arrangements
Qualified medical expenses are those specified in the plan that would generally qualify for the medical and dental expenses deduction. IRS213(d)eligiblemedicalexpenses.pdf.
Qualified medical expenses from your HRA include the following:
• Amounts paid for health insurance premiums.
• Amounts paid for long-term care coverage.
• Amounts paid for qualified medical expenses not covered under another health plan.
HRA Amounts Carried Over at Year End
Amounts that remain at the end of the year can generally be carried over to the next year. Your employer is not permitted to refund any part of the balance to you. These amounts may never be used for anything but reimbursements for qualified medical expenses.
