Health Reimbursement Accounts
A Health Reimbursement Arrangement (HRA) is a tax-advantaged benefit that allows both employees and employers to save on the cost of group healthcare.
HRA plans are employer-funded medical reimbursement plans. The employer sets aside a specific amount of pre-tax dollars for employees to pay for their health care expenses on an annual basis. Based on the plan design, HRAs can generate significant savings in overall health benefits. An HRA account is an individual account and unused funds greater than $500.00 are remitted back to the employer at the end of the plan year. The primary requirements for an HRA are;
the plan must be funded solely by the employer and cannot be funded by salary reduction.
the plan may provide benefits for substantiated medical expenses only. HRAs may be designed in many fashions to suit the specific needs of employer and employees alike. It is one of the most flexible types of employee benefits plans, making it very attractive to most employers.
Most importantly, all employer contributions to the plan are 100% tax deductible to the employer, and tax-free to the employee.