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Why you need an HRA

 

Health reimbursement Arrangement image with clipboard, medicine, glasses, stethescope

What are HRAs?

Health reimbursement arrangements are employer-funded programs that reimburse employees for certain medical expenses. Typically, an employer can only offer an HRA to employees with a group health plan, often a high-deductible health plan. Your employer determines the amount of money available in the HRA, which is typically an amount less than your annual health plan deductible.

Why an HRA?

HRAs provide a tax-free, employer-funded amount of money for healthcare expenses. These arrangements are a great way to pay for out-of-pocket qualified medical expenses while working to meet your plan deductible. There are many advantages to HRAs including:

  • tax savings;
  • out-of-pocket expense reduction; and
  • accrued balance.

How do HRAs work?

You can use your HRA funds to get reimbursed for your own eligible medical expenses, as well as your spouse’s and dependents’ eligible medical expenses. Eligible medical expenses are unreimbursed medical care expenses, as defined under Section 213(d) of the Internal Revenue Code. An employer can more narrowly define the expenses that can be reimbursed from its HRA. Your HRA coverage must be in effect at the time the qualified medical expense is incurred to receive reimbursement.

You typically have two choices when using your HRA to pay for a qualified medical expense: using a health payment card or requesting reimbursement.

Is it for me?

An HRA is advantageous for employees who don’t want to reduce their salary through a salary deferral to fund an account, such as with health savings accounts and health flexible spending accounts. An HRA is entirely employer-funded, essentially boosting your salary with tax-free money for healthcare expenses. However, an HRA gives you less flexibility than an HSA or FSA — with those accounts, you can choose how much you want to contribute instead of your employer determining the amount available in the fund. Although you can’t choose how much money will be contributed to your HRA, they are still a great way to reduce your out-of-pocket health expenses.

Check out our HRA Guide to see three case studies demonstrating how an HRA can benefit you in various life stages and circumstances, and more in-depth information on what an HRA is.

For more information about employee benefits, our services and products, contact HANYS Benefit Services by email or call 800.388.1963.


The information in this newsletter is intended for informational use only and should not be construed as professional advice. ©2022 Zywave, Inc. All rights reserved.

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