An HRA is a tax-free medical benefit account that allows employers and participants/employees to save on the cost of healthcare. An HRA is an employer-funded healthcare reimbursement plan, whereas the employer sets aside a specific amount of pre-tax dollars that the participant/employee can use to pay for eligible healthcare expenses.
Who is eligible for an HRA?
To be eligible for an HRA, a participant/employee must work for an employer that offers an HRA. Employers must offer a group health plan in addition to an HRA, but it is not required that the participant/employee enrolls in both the HRA and group health plan.
What’s the benefit of an HRA?
A participant/employee will not pay taxes on any funds contributed to an HRA.
Is there a limit to HRA contributions?
Yes. HRA contribution limits for 2020 are $1800 per participant/employee.
What expenses are eligible to spend HRA funds on?
Eligible healthcare expenses are governed by IRS Section 213(d).
An HRA also allows the participant/employee to spend on certain types of health insurance premiums such as COBRA continuation coverage and short-term limited duration insurance (STDLI).
What if I do not use all of my HRA funds during the plan year?
The employer has the option of allowing a rollover of unused funds from one plan year to the next. The employer also determines the maximum rollover amount. If a participant/employee is enrolled in more than one HRA or similar group health plan during the same period, the unused amounts under all plans will be aggregated to determine if the maximum rollover amount of $1800 exceeds the limit.