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HRA Plans

This information is only to be used as general information and not to be construed as legal advice or opinion.

What is an HRA?

It is a Health Reimbursement Account. These were set up to be an employer funded account for the payment of medical expenses not covered in another manner. An employer would fund this type of plan to a certain amount per employee per year. Any amount in an employee’s account from 0% to 100% not used in a plan year could be rolled over into the next plan year depending on the how the plan document was set up.

Under the ACA regulations HRAs have to be coupled with a major medical plan, either full insured or self-funded. HRAs cannot be a stand-alone plan. HRAs can be used with a major medical plan to provide benefits that conform to the ACA requirements of maximum deductibles and maximum out of pocket when both the medical plan and the HRA are taken into consideration as the “Benefit Plan” to the employees.

There are several important considerations to take into account when setting up the Plan Documents for a HRA such as:

  • Does the employer want to allow a roll over? If so, how much is allowed to be rolled over each year?
  • If there is a roll over allowed, is there a maximum amount that the employee can accumulate in their HRA account? Take into consideration that these amounts are an Employer Liability.
  • Is an Employee allowed to access these accounts after termination? After Retirement?

Advantages of HRAs to employers include:

  • Reimbursements of claims are tax-deductible to the employer the same as medical benefits or premiums.
  • Employers can know their maximum liability on HRA expenses for the plan year.

Advantages of HRAs to the employees include:

  • HRAs must be offered in conjunction with a major medical benefit and can be used to reduce the out of pocket expenses to the employee under the major medical benefit.
  • Reimbursement of medical expenses to the employee is tax-free.
  • Contributions to the employee’s HRA account by the employer are excluded from gross income.

HRAs can be a useful tool for benefit packages when properly setup to meet the needs of the employer and the employees.

Boulder Administration Services, Inc.
P.O. Box 1046
715 S. Washington
Boulder, MT 59632

  • Phone: 406-225-3699
  • Toll Free: 877-406-3699
  • Fax: 406-225-3521