Overview: A Health Reimbursement Account or Arrangement (HRA) is an employer funded benefit plan used to reimburse employees for approved medical expenses, typically on a pay-as-you-go basis. The employer contributes on behalf of all eligible employees. No employee contributions are allowed.
HRAs have advantages for both the employer and the employee. Advantages for the employer include:
Some advantages for employees include:
Unlike health savings accounts (HSAs), an HRA is owned and operated by the employer. As a result, it is the employer's responsibility to ensure that the HRA is used only for qualified medical services.
Author: Tracy Morley, SPHR, Legal Editor
Updated to reflect the CARES Act's provision on over-the-counter medication.
Effective January 1, 2020, employers will be able to use a new "Individual Coverage HRA" (ICHRA) to reimburse employees for their premiums for individual health insurance coverage on a tax-preferred basis, subject to certain conditions.
The US Department of Labor, jointly with the IRS and the Department of Health and Human Services, released proposed rules for Health Reimbursement Arrangements intended to increase HRAs' usability.
Under the 21st Century Cures Act, a small employer that has fewer than 50 full-time employees (including full-time equivalent employees) and that does not offer group health insurance to its active employees may provide stand-alone qualified small employer health reimbursement arrangements (QSEHRAs). An employer may use this model notice to fulfill the annual notice requirement.
Employment glossary definition of HRA (Health Reimbursement Arrangement).
HR guidance on the benefits of Health Reimbursement Accounts for employees and employers.