Skip to main content

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.

Popular posts from this blog

SECURE 2.0 Discussion Series: Session One

SECURE 2.0 provisions: What we know and what’s still up in the air The SECURE 2.0 Act, signed into law in late December 2022, has factored heavily in retirement industry discourse since the final legislation was published. As with any legislation of this depth and breadth, there’s a lot to digest and the industry takes time to adjust. Our team of experienced advisors recently met to discuss some of the more nuanced provisions of the legislation, such as changes to Roth contributions, and what they could mean for plan sponsors. Panel participants included the following HBS team members: Noah Buck, Christina Bauer-Dobias, Sean Bayne, Vincent Bocchinfuso and Kathleen Coonan. Highlights of our panel’s conversation below should serve to help guide plan sponsor thinking. On Roth employer contributions NB – In addition to deferring pre-tax or Roth, plan sponsors can now allow employer contributions to be classified as Roth, is that right? VB – Correct. This is immediately available to plan s

COVID-19: Retirement and Benefit Plan Resources

As the COVID-19 crisis continues to unfold, we are closely monitoring news and updates from top sources. We’ll be updating this section as new developments unfold. Here are several key articles and links to help plan sponsors and administrators navigate the COVID-19 impact to retirement and benefit plans: Retirement Plans 4 Key CARES Act Provisions for Retirement Plan Sponsors Markets React to Coronavirus   Important Considerations for Retirement Plan Sponsors during the Coronavirus Pandemic In Fed We Trust Participant Education Services: Timely Help from a Safe Distance CRDs 100% Taxable for New York State and Local Income Tax Purposes in 2020 IRS Permits Remote Notarization of Participant Elections   Employee Benefits CARES Act Expands Health Coverage Rules Understanding the Historic $2 Trillion Stimulus Package Employee Compensation and Benefits During Closures and Furloughs DOL Clarifies Exemptions to Coronavirus Paid Leave Laws Small Business Exemption to

SECURE 2.0 Discussion Series: Session Two

The retirement industry has been buzzing since the SECURE 2.0 Act was signed into law last December. This new, comprehensive legislation has sparked a lot of discussion. As with any major reform, it will take time for the industry to fully adapt and understand all its implications. Following our April 11 webinar on the first three months of the industry’s response, our team reconvened to discuss some of what we have heard from our client and vendor partners and to respond to some of the great questions we heard from attendees. Panel participants included the following HBS team members: Noah Buck, Christina Bauer-Dobias, Sean Bayne, Vincent Bocchinfuso and Kathleen Coonan. The Discussion SB – Throughout the webinar, I wanted to stress two things: 1) confusion about where to start and what is expected from plan sponsors is normal; and 2) even more than three months in, this is a developing situation and people should expect changes as time goes on. With those in mind, engagement through