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.
- 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