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HRA With so many different health care accounts available today, it is easy to confuse them. Understanding how each account works can make a huge difference when trying to figure out which plan is right for you. One of the relatively new options available from take care is the HRA. An HRA, or health reimbursement account, is an account in which an employer sets aside funds to reimburse employees for qualified medical expenses. HRAs go by several names: personal care accounts, health reimbursement accounts, or even health reimbursement arrangements. Whatever the name, the concept is the same. These accounts include contributions made by an employer, not an employee. This also means the employer, not the employee, owns them. They can reimburse expenses for employees, as well as the employee's spouse and dependents. Also, remaining HRA balances roll over to the next year and do not fall in the "use it or lose it" category. Differences between an HRA and an FSA Health reimbursement accounts are not 125 plans (though they can be used in conjunction with one). As such, the same restrictions put on a 125 do not apply to an HRA. As mentioned above, balances can be carried over from year to year. But also, the maximum coverage does not have to be made available during the entire coverage period. (With flexible spending accounts, you can spend the money you will be contributing prior to making the actual contributions.) HRAs also do not have a mandatory 12-month coverage period. Since an HRA account can be used in conjunction with an FSA, there are some rules that govern such a situation. By default, an HRA must be exhausted before amounts can be paid out of an FSA. This can be changed when an HRA is drafted to specify that payments will be made from this account only when expenses exceed the balance of the FSA. Since FSA funds are forfeited at the end of the year, it is advisable, in many cases, to make this change. |
Additional Topics Consumer-Directed Health Plans Consumer-Driven Health Accounts Dependent Care Flexible Spending Accounts Flexible Health Spending Accounts Flexible Medical Expense Accounts Health Care Flexible Spending Accounts Health Reimbursement Arrangements IRS Section 125 Cafeteria Plans Medical Expenses and Income Tax Plan for Medical that Health Insurance Doesn't Cover Save 25% to 40% on Health Expenses Save on Co-Pays and Over-the-Counter Medications Save on LASIK and Orthodontic Costs Section 125 Plan Administration |
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