HRA (Health Reimbursement Arrangement)
A Health Reimbursement Arrangement (HRA) is another excellent method for adding a consumer-driven component to your employee benefit plan. HRAs are used to reimburse employees for qualified medical-related expenses on a non-taxable basis. Effective alone, or in conjunction with an FSA, HRAs are easy to implement, easy for employees to manage and provide savings on out-of-pocket expenses.
What makes a HRA different from an FSA?
HRAs, developed under U.S. Treasury and IRS rulings, operate using employer funds only – there are no employee contributions. HRAs reimburse current, former or retired employees, including spouses and dependents, for:
- Medical care expenses as defined by IRS Code Section 213
- Health-related insurance premiums
- Long-term care insurance premiums
There is no dollar limit to the employer’s contribution for HRAs and any unused amounts by the employee can carry forward from year to year. Tax savings are enjoyed by both employers and employees -- reimbursements paid by the employer are eligible as a business deduction and are also tax-free for employees.
NOTE! When used in conjunction with an FSA, the employer decides which account pays for the reimbursement first.
ProcessWorks Proven Processes
- Communication tools are complimentary assets that facilitate maximum participation.
- Administration services focus on accuracy and efficiency from start to finish.
- Funding options are convenient and designed to reduce in-house administrative responsibilities.
- Regulatory Compliance provides ongoing guidance and updated materials which reflect any or all changes from the IRS or DOL. We maintain all legal documents and our proprietary plan tracking software constantly monitors and ensures your plan compliance.
You can download the complete regulations by clicking on the following links:
IRS Notice 2002-45
Revenue Ruling 2002-41
Department of Treasury Press Release
