HRA: Health Reimbursement Arrangement

An HRA is an employer-sponsored arrangement that is used to reimburse employees on a tax-free basis for their eligible medical expenses.  Unlike a health savings account (HSA), employees do not need to participate in a high deductible health plan to be eligible for an HRA.

HRA Basics

  • HRAs are funded completely by the employer
  • Employers have considerable design flexibility - they set the maximum reimbursement amount
    • Employers may link HRA contributions with some type of employee behavior, such as participating in a wellness program
  • HRAs may reimburse employees for their own eligible medical expenses as well as their spouse's and dependent's eligible medical expenses
  • HRAs may, but do not have to, allow unused funds to carry over from year to year - how much is carried over is up to the employer