Buhr & Associates
A Health Reimbursement Arrangements (HRA) is an employer-paid health care arrangement which is often paired with a high deductible
health plan to help employers lower their health care costs without sacrificing employee benefits.
How does it work?
Typically an employer creates an unfunded HRA account for each participating employee and reimburses the employee up to the HRA limits
that the employer presets. An employer generally reimburses all or a portion of the deductible, coinsurance and copays. If the employer
chooses, dental and vision expenses may be reimbursed as well.
Tax Implications
All contributions made to the HRA by the employer are 100% tax deductible. Any reimbursement that an employee receives is tax-free.
Advantages
Employers benefit from offering an HRA and pairing it with a high deductible health plan by reducing insurance premiums. A much higher
deductible reduces premium cost. And, statistically, not every employee is going to meet their maximum HRA allotment, therefore,
employers can save a substantial amount of money over traditional plan designs.
While employees may have a much higher deductible than what they have been used to, by having the employer reimburse all or a portion of
the deductible, coinsurance and copays, the employee does not have near the out-of-pocket expense that they first think. For instance, if an
employee has a $3,500 deductible and the employer is reimbursing the last $2,500 of the deductible (in order to keep the out-of-pocket the
same as their previous plan), the employee really only has a $1,000 deductible. Depending upon how the employer structures the HRA, the
benefit to the employee can even be better than their current plan design.
What expenses are not eligible for reimbursement?
If an expense is deemed ineligible after it has already been paid, the HRA participant will be required to pay the HRA back. This typically is
done by having the employee immediately pay back the ineligible expense or by having future HRA eligible expenses offset by the amount
previously paid out. If the employee fails to reimburse the HRA or if there are no future claims to offset the ineligible expense during the plan
year, the employee may be required to pay income tax. For a complete list of eligible and ineligible HRA reimbursement expenses, please
refer to IRS Publication 502 at: www.irs.gov/pub/irs-pdf/p502.pdf.
Health Reimbursement Arrangements
N52 W14266 Thornhill Dr. Menomonee Falls, WI 53051
Phone: (414) 755-2024 Toll Free: (800) 730-3469 Email: twb@buhr-n-associates.com
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