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What is a Health Reimbursement Arrangement (HRA)?

A Health Reimbursement Arrangements is an employer-owned accounts that allow participants to be reimbursed for eligible out-of-pocket expenses, including co-pays, coinsurance and deductibles. Health Reimbursement Arrangements are typically tied to a Consumer Driven Health Plan, or High Deductible Health Plan (but they don’t have to be), typically creating lower health insurance premiums for employees and employers. Employers will contribute a predetermined dollar amount for each employee into the account and the employee will have a set amount of time in which the funds must be claimed.

Health Reimbursement Arrangements allow employees to be reimbursed for eligible expenses from a pool of funds set aside by the employer. In many instances, the employee has to meet a certain deductible threshold before the Health Reimbursement Arrangement will start to pay out. For example, your deductible is $1,500 and your employer’s Health Reimbursement Arrangement is set up to pay for any deductible expenses above $500. You must submit documentation showing valid deductible expenses that total at least $500.01 before any payments will be issued. You may submit claims as frequently or infrequently as you would like, however, no reimbursements will be issued until the $500 threshold has been reached.

Do I have to have health insurance to have a health reimbursement arrangement (HRA)?

HRAs are usually provided to complement a high-deductible health plan (HDHP), but can be paired with any type of health plan or used alone. Once your HRA funds are gone, you pay all new and remaining expenses out of pocket.

Who can put money in my HRA?

HRAs are fully owned and funded by the employer.

Does the money in my HRA earn interest?

No. The accounts aren’t individually owned bank accounts.

What is an eligible health care expense?

Eligible expenses under an HRA plan are determined by your employer. Contact your human resources department for information about your HRA plan design and eligible expenses. Generally, the following expenses are eligible under an HRA plan:

  • Health insurance deductibles
  • Coinsurance and co-pays
  • Other expenses included in IRS Publication 502—Medical and Dental Expenses as eligible or qualified expenses
  • Some insurance premiums

Eligible expenses must be incurred for the care of the employee and/or eligible members of the employee’s family and take place within the benefit plan year.

Are my HRA funds available to me any time?

Many HRA plans provide an annual benefit that is available to you in full at the beginning of the plan year.

In other plans, benefits accrue from month to month. For example, your plan may provide $1,200 for the entire plan year accrued at $100 each month. You may only be reimbursed up to the maximum amount you’ve accrued at the time of the claim and reimbursed for the balance of your claim once you’ve accrued more funds. Contact your human resources department for information about your specific HRA fund availability.

How much can be contributed to my HRA?

The amount contributed to your HRA is up to your employer. Contact your human resources department for specific information about your plan design.

What’s the maximum reimbursement amount from my HRA?

Your HRA benefit amount is determined by your employer. Most plans will reimburse eligible expenses up to the full available balance in your HRA. If your plan is based on an accrual, you’ll only be reimbursed the amount that you’ve earned in the plan. Contact your human resources department for specific information about your plan design. 

What happens to the money in my HRA if I leave my job or retire?

Whether or not you can continue to use your HRA funds for qualified expenses after you leave or retire is up to your employer. Contact your HR department for specific information about your plan design.

Does the money I have in my HRA roll over from year to year or do I lose the money at the end of the year?

Whether or not your money rolls over to the next plan year is up to your employer. Contact your human resources department for specific information about your plan design.

Can I use the money in my HRA to pay for my children’s medical expenses, co-pays, and deductibles?

Yes. The money in your HRA can be used to pay for eligible medical expenses of any family member who qualifies as a dependent on your tax return provided the dependent is covered by your HRA.

My domestic partner is covered on my insurance plan. Can I use my HRA for my domestic partner’s medical expenses?

If your domestic partner meets the IRS qualifications of a tax dependent, you can legally use your HRA funds for his or her qualified medical expenses. If your partner doesn’t meet the qualifications, you can’t.

How often can I request reimbursements?

You can request reimbursements as often as you incur a qualified expense. If your plan is an accrual-type plan, you may only be reimbursed up to the maximum amount accrued at the time of the claim and reimbursed for the balance once you’ve accrued more funds.

Is there a deadline for submitting requests?

Some plans allow up to 90 days after the end of the plan year to request reimbursements for expenses incurred during the plan year, known as the run-out period. Contact your human resources department for specific information about your plan design.

Can I use the money in my HRA for non-medical expenses?

 No. Funds can only be used for qualified medical expenses as determined by your employer and outlined in IRS Publication 502—Medical and Dental Expenses. Contact your human resources department for specific information about your plan design.