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An HRA is an employer-sponsored plan designed to reimburse an employee and his or her spouse and/or dependents for eligible medical care expenses as defined under IRS Code §213(d) and per the respective employer's individual plan design. Per IRS guidelines, all medical expenses paid for with HRA funds must be substantiated. An HRA functions similarly to an FSA; however, only an employer can contribute funds into the account on the employee's behalf. In general, HRA plans have no "use-it-or-lose it" policy. Depending on the Plan structure, funds remaining in a participant's HRA are either forfeited to the employer at the end of the Plan Year or a percentage of the funds (as specified by the employer) can roll over and remain in the account from year to year.
The plan can be set up in conjunction with a high-deductible health plan (HDHP) or an FSA. HRAs subject to IRS guidelines and regulations.
The HRA model is a useful tool for employers hoping to manage rising healthcare costs, while providing a benefit to employees. Whether implementing a stand-alone or an HRA/High Deductible Health Plan, careful consideration should be taken to ensure full tax advantage and compliance with IRS regulations.
An HRA can be:
Employer-funded accounts for reimbursement of employee's and/or spouse's eligible medical expenses
Accounts funded up to a pre-set limit (at employer's discretion)
Allowance for rollover of unused funds at the end of the plan year (no forfeiture, unless designated by the employer)
Accounts may be set up in conjunction with a High Deductible Health Plan or FSA Plan
There is no IRS-set dollar limit; the employer has complete flexibility to determine your contribution amount. No carryover feature is required; however, a cap may be placed on any carryover amount.
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Consumer-Directed Healthcare Administration Specialists