(Health Reimbursement Arrangement)
Health Reimbursement Arrangement, HRAs are owned and funded by the employer only. Employee-participants can use their HRA to pay for qualified out-of-pocket medical expenses for themselves and their dependents. HRA-qualified expenses are determined by the employer and may vary from one company to the next. Starting January 1, 2017, small employers with up to 50 full-time employees can now offer standalone HRAs that also reimburse for health insurance premium. There is no government-mandated limit on funding; the employer determines the amount each year. Since the employer is the sole contributor to the HRA, the employer receives the tax breaks; however, employer contributions are not counted as employee-participant income. HRAs are “notional” accounts, meaning that the participant must incur a qualified expense before funds are paid out.