Many employers offer Health Reimbursement Arrangements (HRAs) as part of their benefits package. While most people understand how a Flexible Spending Account (FSA) or Health Savings Account (HSA) works, HRAs operate somewhat differently. Because of the differences, many people aren’t sure how an HRA works. Learn more below.
No matter the type of HRA, your employer funds the benefit. Employees do not pay into an HRA benefit account.
No. HRAs do not count toward your taxable income, making it a tax-free benefit.
That depends on the HRA type and your employer’s plan. There are 4 different HRA plan types; the annual maximum limit that each employee can receive is as follows:
Keep in mind, your employer sets the annual limit within the allowable guidelines. It may be as much as the annual maximum or it could be less.
How you can spend your HRA dollars depends on several things. First, the IRS determines what is and is not considered an eligible expense. Second, each HRA plan has different requirements. Third, your employer can choose to restrict how the funds are spent, as long as the restrictions fall within the IRS regulations.
Your employer may fund the HRA on a set schedule (weekly, monthly, quarterly, semi-annually, or annually) or only in response to approved claims. Generally speaking, you first have to pay the expense. Then you submit a claim to your benefits administrator with a detailed receipt or insurance explanation of benefits (EOB). Once the claim is approved, you get reimbursed from the HRA.
Contact your HR department or benefits administrator. They should provide you with a Summary Plan Description (SPD). The SPD should cover all information about how much your benefit is worth, eligible expenses, how to spend the benefit and receive reimbursement, among other important information.
DataPath’s Captain Contributor program educates and engages employees about tax-advantaged healthcare benefits.