
Health Reimbursement Arrangements (HRAs) for Employees
Offer a valuable benefit to your employees and reinforce your commitment to their well-being. A health reimbursement arrangement, also known as a health reimbursement account, is a flexible and cost-effective option for employers and employees alike.
What Is an HRA?
An HRA is a reimbursement program fully funded by employers that supplements health insurance or is offered in place of a group health plan. An HRA can be used by employees to cover qualified out-of-pocket medical expenses for themselves as well as their spouses and dependents.

Benefits of HRAs for Employers
A Cost-Effective Health Benefit That Gives You Control
Since you administer the HRA account, you as the employer choose how much you want to contribute for each employee each year.
An Alternative to Traditional Group Health Coverage
If you can’t offer traditional group health coverage or don’t want to take on potential risks of offering traditional group health insurance, certain types of HRAs — where you offer a fixed amount per month to employees — can give you more control over the funds you contribute. Plus, HRAs aren’t subject to annual rate hikes.
Tax Advantages
Employer contributions are tax-deductible, and reimbursements are tax-free when an employee files a claim.
No Participation Concerns
There’s no negative impact to your bottom line if employees decide not to use an HRA benefit.
Choose the Features That Make Sense for Your Business
Employers have flexibility when choosing the plan features that work best for their employees and budget.
Augment Your Existing Benefits Offerings
Use an HRA to complement your existing employee benefits package, attract top talent, and retain your workforce.
Benefits of HRAs for Employees
Help With Healthcare Costs
With today’s rising healthcare costs, an employer-provided HRA can help employees pay for eligible out-of-pocket health care costs, copayments, policy deductibles, and other items that aren’t typically covered under a group health plan.
Voluntary Participation
Employee participation in an HRA is voluntary and your staff can choose whether they use the funds.
Tax-Free Reimbursements
Reimbursements from an HRA are tax-free for employees up to the maximum amount for the coverage year. This means that come tax time, the employer’s contributions don’t count toward an employee’s gross income.
More Freedom Over Healthcare Options
With an HRA, employees have greater choice over their options regarding healthcare spending and can use the employer-provided funds to cover eligible out-of-pocket medical expenses.
Is a Health Reimbursement Arrangement Right for Your Business?
Determining whether an HRA makes sense for your business requires thorough analysis of different plan features and any potential limitations. For instance, some drawbacks of HRAs include:
- Employees may be frustrated if they decide to leave the company, since HRA funds do not belong to the employee.
- Depending on the type of HRA plan, there may be employer contribution limits.
- Depending on how a business is set up, self-employed individuals aren’t eligible.
You may also want to compare HRAs to FSAs and HSAs, since each has their own rollover options, employer contributions, funding limits, funding schedules, and reimbursement options. Such variables could impact how each of these health account plans could provide value for you and your employees.

HRA Frequently Asked Questions
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Who Owns the HRA?
Who Owns the HRA?
HRAs are administered and entirely funded by the employer.
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What Expenses Are Covered by an HRA?
What Expenses Are Covered by an HRA?
Only qualified medical expenses are reimbursable by an HRA. If used for a qualified medical expense, these reimbursements may be tax-free. In addition to items such as deductibles, co-pays, coinsurance, dental, vision, prescription, and other out-of-pocket medical expenses, health insurance premiums for current employees, retirees, and COBRA qualified beneficiaries may be reimbursable under an HRA (depending on the type of plan). View a full list of qualifying HRA coverage expenses here.
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Can I Withdraw Money From My HRA Account?
Can I Withdraw Money From My HRA Account?
Given that an HRA coverage is only funded by the employer, employees cannot withdraw HRA funds for purposes outside of the guardrails provided by the IRS. Unused contributions in an HRA are either rolled over to the following year or retained by the employer.
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Do I Have To Have a Certain Number of Employees To Participate in a Health Reimbursement Account?
Do I Have To Have a Certain Number of Employees To Participate in a Health Reimbursement Account?
While employers of any size can offer an HRA, coverage under an HRA has limits for certain types of plans. For example, a QSEHRA is allowable only for employers with less than 50 employees who don’t already offer a health plan.
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Are There Contribution Limits for HRAs?
Are There Contribution Limits for HRAs?
While many HRA plan types have no contribution limits, there is a cap for QSEHRAs in 2022: up to $5,450 for individual employees and $11,050 for families.