What is an HRA?
Definition
A Health Reimbursement Arrangement (HRA) is an employer-funded benefit in the U.S. that reimburses employees for certain qualified medical expenses and/or insurance premiums — tax-free. Unlike an HSA or FSA, only the employer can contribute to an HRA.
For example, an employer might offer a $2,000 annual HRA to help employees cover out-of-pocket medical costs not covered by insurance.
Why HRAs matter
HRAs give employers flexibility in offering health benefits and help employees manage healthcare costs:
Tax-free reimbursements for eligible medical expenses
No employee contributions required
Customizable by employer size, plan type, and workforce needs
Often used as a budget-friendly alternative to traditional group health plans
See IRS guidance on HRAs for tax rules and plan types.
How HRAs work
There are several types of HRAs, each with different rules:
Type | Who it’s for | Key Features |
QSEHRA | Small businesses (<50 employees) | Reimburses premiums + expenses; capped annually |
ICHRA | All employer sizes | Can replace group plans; used to reimburse individual premiums |
Integrated HRA | Offered with group health insurance | Reimburses expenses not covered by the group plan |
General rules:
Funds are employer-owned and don’t roll over (unless allowed by the plan)
Employees submit receipts for reimbursement
Reimbursements are not taxed
Example
A company offers a QSEHRA of $3,000/year. An employee submits a $400 receipt for dental work and receives a reimbursement — tax-free — directly from the employer.
FAQs
Can employees contribute to an HRA?
No. HRAs are 100% employer-funded. Employees can’t add money.
Are HRA reimbursements taxable?
No, as long as the expenses are qualified under IRS guidelines.
What can an HRA be used for?
Medical expenses, dental/vision care, insurance premiums, and more, depending on the type of HRA.
Do HRA funds roll over each year?
It depends on the employer’s plan design. Some HRAs allow limited rollovers.
Can HRAs be used with other benefits like HSAs?
Sometimes, but there are coordination rules. For example, using an HRA may limit HSA eligibility unless structured carefully.
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