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Q. What is a Health Reimbursement Account (HRA)? HRAs are employer-funded dollars that can be used to reimburse employees for the purchase of qualified medical expenses, such as health and dental plans, co-pays, deductibles, vision care, prescriptions, etc. Often, employers use HRAs in conjunction with a high deductible/co-pay health plan.
Q. What is the advantage of an HRA?Employers pay less in premiums for their health/dental plan, using the savings to reimburse eligible expenses. The employer can design the HRA to best meet their needs (i.e., reimburse all or part of a deductible/co-pay). Employer contributions to an HRA are not treated as taxable income to the employee, are tax deductible to the employer, and employees can use the funds to pay for defined out-of-pocket expenses.
Q. Who is eligible for an HRA?Only an employer can set up and contribute to an HRA program. This is done on behalf of the employees. Self-employed individuals are not eligible for an HRA.
Q. How are HRA funds allocated?The IRS allows employers to establish HRAs with unfunded “credits” rather than hard-dollar amounts. In essence, the HRA is a “promise to pay.” This arrangement is similar to a line of credit, against which employee expenses are paid with employer funds. Employers determine how often employees can access the contribution during the year.
Q. Is there a limit on contributions to an HRA account?No. There is no limit on the amount of money an employer may contribute towards their HRA.
Q. Can HRAs be offered in conjunction with a health insurance plan?Yes. HRAs can be offered jointly with a health insurance plan or as a stand-alone option for employees.
Additionally, HRAs can be offered jointly with a Flexible Spending Account (FSA), which allow employees to use their pre-tax contributions to pay for eligible health care costs that are not covered by the HRA.
Q. What types of expenses can be paid with an HRA? According to the IRS, HRAs can be used to pay for any item that qualifies as a medical expense under the Internal Revenue Code, with the exception of long-term care. However, each employer has the right to determine whether employees can use HRAs for any of these items or only for medical expenses covered under their health benefit plan.
Q. Do HRAs cover spouses and dependents?Yes. The IRS allows employers to offer access to HRA funds for spouses and dependents of employees.
Q. What happens if there is money left over in the HRA account at the end of the year? The IRS allows for unlimited accumulation in an employee’s account, so unused funds may be rolled over from year to year. The employer determines if unused, allocated HRA funds can be rolled over from year to year.
Q. What happens to the HRA funds if an employee changes jobs?Former employees who elect COBRA continuation coverage maintain access to the HRA for as long as they pay their COBRA premium for this benefit.
Q. Can employers access HRA accounts online?Employees have 24-hour access to their HRA account online. Click here to login. You may also contact the Altus Benefit Administrators’ Customer Service Center at 1-800-371-7542, Monday–Thursday, 8 a.m. – 6 p.m. ET; Friday, 8 a.m. – 5 p.m. ET.