HEALTH REIMBURSEMENT ACCOUNT

What is the Maximum Contribution Employers Can Make to HRAs?

There is no legally mandated maximum contribution limit for HRAs. In most cases, employers are free to put as much as they like into these accounts. This is another way in which HRAs differ from HSAs and FSAs, which both have maximum contribution limits.

What Medical Expenses Qualify for Reimbursement?

In order to qualify for reimbursement from an HRA, a medical expense must meet all requirements of Section 213 of the Internal Revenue Code. The IRS often lets businesses further restrict what their plan considers a qualified medical expense if businesses want to.

While businesses frequently can limit qualified expenses as they wish, most plans cover a broad array of medical expenses. Some commonly covered costs include:

• Prescription drugs
• Co-payments and coinsurance
• Contraception
• Certain medical supplies
• Premiums for individual health insurance policies

Do HRAs Cover Qualified Medical Expenses for Family Members?

Qualified medical expenses for family members are typically eligible for reimbursement from an HRA. In general, any family member that an employee claims as a dependent is covered by the employee’s HRA. This may include spouses, children and, in a few cases, other family members.

What Happens to Funds in an HRA at Year’s End?

Any HRA benefits that employees don’t use within a year are usually forfeited, as their benefits typically reset at the end of either the calendar year of fiscal year. A few businesses let their employees’ benefits roll over from year to year, so any that aren’t used in one year aren’t necessarily forfeited.

The funds in an HRA, however, usually aren't lost. They remain in the account and can be used to help fund the account in the next year.

What Do Businesses Use HRAs For?

HRAs are generally provided by businesses to help employees with healthcare costs that their health insurance doesn’t cover. They may be used to help pay a health insurance plan’s deductible (especially if employees have a high deductible plan) or cover medical expenses that aren’t covered by employees’ health insurance.

How Can Businesses Set Up an HRA?

A health reimbursement account is usually offered as part of a benefits package. To learn more about HRAs and benefits packages, business owners should speak with an advisor who specializes in these kinds of products.