Health Reimbursement Arrangement (HRA) Details
HRAs are simple employer-funded, Section 105 defined contribution healthcare plans which provide tax-free benefits for employees and their legal dependents.
HRAs can be paired with high-deductible health care (HDHC) plans which may help employers reduce overall health plan costs.
HRAs are generally established as medi-gap policies to help offset higher deductibles or other out-of-pocket expenses for employees and dependents or retirees. They may also be offered as carve-out plans independent of major medical plans.
HRAs combine the best aspects of FSAs (Flex Plans) and MSAs (Medical Savings Accounts) including:
- tax advantages
- employee empowerment
- rollover of unused funds
- premium reimbursement*
- Accompanying health plan may have co-pays. Unlike HSA no "rules" on what constitutes HDHC Plan
- HRA may operate in conjunction with other "first dollar" coverages such as Flex Plans - unlike HSA
- Employer-controlled benefit - all plan parameters and eligibility requirements established by employer
- No minimum participation requirements. Benefits may be tiered (i.e. single vs. family coverage)
- 100% employer funded; no employee salary deferrals and no "use it or lose it" issues
- Plan may reimburse any Section 213 healthcare expense or be established to limit allowable expenses (example: "deductibles only" or "deductibles only after employee has met first $500 of deductible")
- Carry-over of unused funds allowed; rollover may be unlimited or capped
- "Unfunded" benefit plan; claims are paid from employer's general assets as they are presented
- No "Uniform Coverage" requirements - benefits may accrue over time
- Any employer can establish an HRA; however, self-employed individuals may not participate(i.e. 2% owners of Subchapted "S" corporations, members of LLCs, partners in partnerships and sole proprietors)
* Caution: HIPAA implications