Health Reimbursement Arrangements (HRAs) are tax-advantaged, employer-funded accounts geared to help pay for qualified medical expenses not covered by a health plan. Months ago, NueSynergy explained the benefits of an HRA. Now, it’s time to discuss five frequently asked questions relating to this account.

FAQ #1: How much can an employer contribute to an employees’ HRA?

An employer can contribute any dollar amount, so long as it’s above a minimum annual commitment of $250 per employee. This commitment is a promise-to-pay, with funds allocated only if and when an eligible claim is incurred.

FAQ #2: When does an HRA start paying for an employee’s expenses?

The employer has two options. They can either allow the HRA to pay before the employee meets any deductible, or they can set it up so an employee has to meet a certain amount of out-of-pocket expenses before an HRA begins to pay.

FAQ #3: Does an HRA provide a tax benefit for employees?

Yes. HRA funds are contributed to employees on a pre-tax basis. This means disbursements aren’t included when calculating taxable income. For this reason, employees cannot claim an income tax deduction for expenses that haven’t been reimbursed under an HRA.

FAQ #4: Do HRA contributions have to be made in equal amounts each month?

They can be, but an HRA can also make contributions available Day 1 of the plan. Regardless of which method, an employer holds the money until qualified expenses are incurred and then reimbursed.

FAQ #5: What happens to HRA funds if an employee leaves the company?

Since funds are funded by an employer, any funds go back to them if an employee terminates for any reason.

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