Health Reimbursement Arrangement
Who Is Eligible
General Eligibility – Typically all benefit eligible employees can participate in an HRA.
Plan Eligibility – Employers can also set additional eligibility rules for the HRA plan such as:
- Limiting eligibility to a particular health plan as long as they do not discriminate in favor of highly compensated employees.
- Cover only employees or cover employees and their dependents, as well as domestic partners as long as they meet the IRS Section 152 definitions.
- Provide coverage to retirees.
(Note: Partners in a business, members of LLCs, and shareholders who own 2% or more in S-corporations, however, are not eligible to participate in the HRA.)
Contribution Limits
Funding Limits – There is no limit on the amount of money your employer can contribute to the HRA. Each year your employer may set the HRA limits based on the overall strategy and goals of the group health plan. Additionally, based on plan design, the maximum reimbursement amount credited under the HRA each year could be increased or decreased by amounts not used during a previous plan year.
- HRAs are funded solely by the employer.
- Contributions are not included in the employee’s income.
- No federal income taxes or employment taxes on amounts your employer contributes to the HRA.
Plan Designs
The Health Reimbursement Arrangement provides employers with enormous flexibility when determining the plan design that best fits their needs and budget. Below are just a few examples of plans designs an employer could implement for their group.
| HRA Type | HRA Description | HRA Example |
|---|---|---|
| Employee Pay First | The employee pays their employer-defined portion of the out-of-pocket expenses. Once met, the employer funded HRA is activated and used to pay the remaining portion of the health plan deductible. |
Employee: $400 | HRA: $800 |
| Employer Pay First | The employer funded HRA is used to pay the first portion of the health plan deductible, then the employee pays the remaining balance of deductible expenses. | HRA: $200 | Employee: $600 |
| Employer GAP HRA | The HRA employer pays the first portion of deductible expenses up to a limit defined by the plan. Next, the employee pays the remaining portion of the deductible expenses. The HRA employer is reactivated to reimburse a defined amount of co-insurance expenses after which the employee is responsible for the remaining portion of their co-insurance up to the out-of-pocket maximum. | Employee: $400 | HRA: $800 | Employee: $400 |
| Employee Gap HRA | The employee pays the first portion of deductible expenses up to a limit defined by the plan. Next, the HRA employer pays the remaining portion of the deductible expenses. The employee is then responsible for a defined amount of their co-insurance expenses before the HRA is reactivated and can be used to reimburse the remaining portion of their co-insurance up to the out-of-pocket maximum. | HRA: $400 | Employee: $800 | HRA: $400 |
| Percentage Based Reimbursement | The employer HRA reimburses the employee a percentage of their out-of-pocket deductible costs up to the employer defined HRA maximum amount. | Employee: $500 | HRA (75%) Employee (25%): $1,000 |
| Co-Pay Share | The employer can set a specific dollar amount to reimburse for certain co-pays. | Dr. Office: $25 | RX: $50 | ER Visit: $75 |
| Premium Reimbursement | Employers with less than fifty (50) full time employees are able to provide reimbursement through the HRA up to $4,950 for individual plans and $10,000 for family plans per year to help their employees purchase individual health insurance plans that best fits their unique needs. |
HRA (Individual) $4,950 | Employee (Individual): $1,050 Total Premium: $6,000 HRA (Family): $10,000 | Employee (Family): $2,000 Total Premium: $12,000
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