A Health Reimbursement Arrangement (HRA) is a federally approved, tax-favored program an employer can set up for employees. HRAs are accounts funded solely by the employer to reimburse medical expenses of the employee.
Any size company can implement an HRA and save. The amount of savings depends on total company payroll and how much employees contribute toward their benefits.
How an HRA Plan Works
- A high-deductible health insurance plan is coupled with an HRA set up by the employer.
- Using the HRA, the employer reimburses a portion of each employee’s medical expenses – usually by paying for part of the deductible.
- The premium savings realized with the high-deductible plan are often more than enough to completely fund the HRA reimbursements.
- HRAs are available to any employer, regardless of the number of employees.
- HRAs do not require pre-funding.
The employer maintains complete control over the HRA design.
- The employer chooses the maximum annual reimbursement amount for each employee.
- The employer decides who pays deductible expenses first – the employee or the HRA.
- The employer can retain unused amounts at the end of the year or elect to roll them over and make them available to employees in the following year.
- The employer can retain unused funds should an employee leave the company.