What is an HRA?
An HRA is an employee benefit plan that is designed to help offset expenses incurred by employees. The account funded solely by the Employer in order to reimburse employees for certain medical care expenses which are incurred by the employees and/or dependents. The Employer may also allow any monies that are not used to reimburse an employee during a Plan Year to be carried over to the next Plan Year. This is an optional provision and not required. An Employer may also choose to allow monies not used during a plan year to be forfeited back to the Employer.
What types of expenses can an HRA reimburse?
HRA’s can reimburse for substantiated medical expenses as described in Code Section 213(d) that have not been reimbursed by any other means. What an HRA reimburses is determined by Plan Design; however, we typically see Employers opting to reimburse items like deductible and co-insurance expenses. The plan design is set by the Employer and can be changed on an annual basis. For example: Employer A may decide to implement an HRA that only reimburses for the Deductible Expenses incurred by Employees while Employer B may decide to reimburse for all Section 213(d) expenses. The document will be written to give a detailed description of what the Employer has decided to reimburse.
On Tuesday, December 13, 2016, the 21st Century Cures Act was signed into law. This Act allows for small business with less than 50 full-time employees, and who do not provide group health insurance coverage, to offer standalone HRAs to reimburse individual health insurance premiums.
Under the new law, eligible employers can offer individual-premium-reimbursement HRAs that provide up to $4,950 annually for individual coverage and up to $10,000 annually for family coverage. For more information and requirements, please click here.
For more detailed information regarding HRA plans, please contact our office or request a Proposal.