Health Reimbursement Arrangements (HRAs) – An Overview

If your company offers a Health Reimbursement Arrangement (HRA), then you need to know what that means for you. An HRA is an employer-sponsored benefit account funded ONLY by the employer that allows employees to pay for qualified healthcare expenses. There are four types of Health Reimbursement Arrangements and each one is a little different than the other. 

HRA Specifics

Health Reimbursement Arrangements are owned and funded by the employer. That means the employer (or company) chooses how much to put into the account and what to pay for (under IRS guidelines). HRAs tend to vary from company to company.

Employers pay for HRAs to help their employees pay for approved healthcare costs!

Employers must provide a Summary Plan Document (SPD) that explains all of the plan details. Depending on the account type, there may be a healthcare plan requirement.  If you leave the employer for any reason, your HRA benefits may no longer be available to you.

Plan Types

  • Health Reimbursement Arrangement: A “standard” HRA can be offered by any employer to pay for IRS-approved healthcare expenses. However, the employer may pick and choose which expenses to cover, and you have to be on the company's group health plan to participate. A Health Reimbursement Arrangement cannot be used to pay for group or individual healthcare insurance premiums. 
  • Individual Coverage HRA (ICHRA): An ICHRA can be offered by companies of any size. In addition to IRS-approved healthcare expenses (chosen by the employer), an ICHRA can cover individual insurance premiums (plans bought on the open market that are not covered by the company’s group plan).
  • Excepted Benefit HRA (EBHRA): An EBHRA can be offered by companies of any size. The EBHRA can only be used to pay for premiums for dental and vision insurance, COBRA coverage, and other ‘excepted’ benefits.
  • Qualified Small Employer HRA (QSEHRA): A QSEHRA can only be offered by “small employers,” those with 50 or fewer employees. QSEHRAs can cover individual health insurance policies, and other IRS-approved expenses (employer chosen).

HRA Contribution Limits

Each HRA has different contribution requirements:

  • HRA – No IRS contribution limits. The employer sets the limit. 
  • ICHRA – No IRS contribution limits. The employer sets the limit.
  • EBHRA – The employer can choose to fund the EBHRA up to the annual limit of $1,800.
  • QSEHRA – The employer can choose to fund the account up to the annual limit of $5,150 for Single coverage and $10,450 for Family coverage.


Need to Know!

  • Qualified expenses vary by employer, and can include prescriptions, dental and vision expenses, copays, deductibles, and more. Refer to your Summary Plan Description (SPD).
  • Unused funds may rollover each year, depending on plan design.
  • Employers enjoy payroll tax benefits from contributions, while employees pay no taxes when the benefits account is used for eligible expenses.
  • Health Reimbursement Arrangements are considered a notional account. The employee must have a qualified medical expense before any funds are paid out.

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Betty the Benefactress Explains HRAs

HRA Contribution Limits

Each HRA has different contribution requirements:

  • HRA – No IRS contribution limits. The employer sets the limit. 
  • ICHRA – No IRS contribution limits. The employer sets the limit.
  • EBHRA – The employer can choose to fund the EBHRA up to the annual limit of $1,800.
  • QSEHRA – The employer can choose to fund the account up to the annual limit of $5,150 for Single coverage and $10,450 for Family coverage.


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