HEALTH REIMBURSEMENT (HRA)

HEALTH REIMBURSEMENT (HRA)

Health reimbursement arrangements (HRA's) or accounts are tax advantages sanctioned by the Internal Revenue Service (IRS) and funded by the employer.

These tax advantages offer health benefit plans that reimburse the employees to fund individual health insurance premiums and medical expenses. Through the use of health reimbursement arrangements, the healthcare cost is offset against the tax advantage, for both the employers as well as the employees.

According to IRS policy, health reimbursement accounts must be funded solely by the employer, the contribution cannot be made through deduction in the salary of the employee, and doing so would be considered illegal and can be prosecuted in a court of law. There is no maximum or minimum threshold for the amount that can be paid into the account.

ELIGIBLE FOR HRA CLAIMS

• Current and former employees of the company
• The employee’s spouse and dependants
• The spouses and dependents of deceased employees

REIMBURSEMENT OF HRA

According to IRC section 105, employees who have qualified medical expenses will be reimbursed a maximum dollar amount for a particular coverage period. The reimbursements of HRA can only be eligible for those items which are not covered by the standard insurance plan.

ADVANTAGES OF HRA

Advantages for the employer:

• Defined maximum expense of healthcare benefits
• Qualified claims are tax deductable

Advantages to the employee:

• Contributions are restricted to the employer, as outlined by the IRS
• Employees getting tax free medical benefits
• Unused funds are carried to the next fiscal year
• HRS is offered alongside standard company health benefits

LIMITATIONS OF HRA

• Self-employed individuals are ineligible
• High income individuals are subject to limitations
Health reimbursement arrangements have proven to be an extremely popular tax advantage offered by the IRS, for both the employer as well as the beneficiaries the employees.