HRA Health Reimbursement Account
What Is a HRA Health Reimbursement Account?
A health reimbursement arrangement (HRA) is an employer-funded plan that reimburses employees for qualified medical expenses and, in some cases, insurance premiums. Employers are allowed to claim a tax deduction for the reimbursements they make through these plans, and reimbursement dollars received by employees are generally tax free.
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How a HRA Health Reimbursement Account Works
A health reimbursement arrangement is a plan set up by an employer to cover medical expenses for its employees. It is very similar to a HSA account. The employer decides how much it will put into the plan, and the employee can request reimbursement for actual medical expenses incurred up to that amount. All employees in the same class must receive the same HRA contribution.
An HRA is not an account. It is owned by the company. Employees cannot withdraw funds in advance and then use them to pay medical expenses. Instead, they must incur the expense first, then have it reimbursed. Reimbursement at the time of service is possible if the employer provides an HRA debit card. An employee who uses up all the allocated funds in the HRA before year-end will have to cover any subsequent health bill out-of-pocket—or with the funds in a flexible spending account (FSA), also known as a flexible spending arrangement), when available, or a health savings account (HSA) for employees who have a high-deductible health plan (HDHP).