HR Support with Health Reimbursement Accounts

Editor's Note: Employers can use health reimbursement accounts as a means to control health care costs.

Tracy MorleyOverview: 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:

  • Reimbursements for qualified medical expenses are tax deductible; and
  • Employers know the maximum expense associated with the health benefit plan, since contributions to the HRA are determined in advance.

Some advantages for employees include:

  • No employee contributions;
  • Employer contributions are excludable from gross income;
  • Unused funds can be rolled over to future years; and
  • No requirement to participate in a high deductible health plan.

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

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HR guidance on the benefits of Health Reimbursement Accounts for employees and employers.