Health Reimbursement Arrangements 101 (HRAs)
An HRA is an employer established benefit plan that is funded solely by the employer.
- The employer sets the maximum dollar amount for a coverage period.
- There is no limit on the amount of money an employer can contribute to an HRA.
- Contributions cannot be paid through a voluntary salary reduction agreement on the part of an employee.
Money in an HRA can never be used for anything except reimbursements to employees for qualified medical expenses.
- The expense must have been incurred on or after the date you are enrolled in the HRA.
- An employee cannot deduct qualified medical expenses as an itemized deduction that are reimbursed by a distribution from the HRA.
Amounts that remain at the end of the year cannot be refunded to employees. However, balances can generally be carried over to the next year.
At the employer's discretion, employees may take funds if they leave the employer.
Funds are subject to COBRA. To learn more, see: COBRA.
Self employed people are not eligible for an HRA.
There is no requirement for administrators of the account to report contributions or distributions to the IRS.
For additional information, seeL