If you are the proud user of a Health Reimbursement Account (HRA) congrats! If you’re having a little trouble determining what exactly that means, you’re not alone.
Among employees with an HRA, there is some confusion around who owns the account and who puts money in the account.
We’ll break down answers to all of those, starting with “What is an HRA?”
What is an HRA?
An HRA, or Health Reimbursement Account, is a tax free account. It is provided through your employer to help you pay for out-of-pocket medical expenses that aren’t covered by your health plan. The specifics of an HRA will vary based on what your employer has set up.
What about my HRA?
The best way to find information on the HRA from your employer is to look at two guides, called Plan Documents and Plan Highlights.
Think of these as bios of your account. They give details on different rules pertaining to the account, what it can be used for and other important pieces of info.
A full breakdown of where and how to locate these documents is available here.
Who puts the money in the account?
Unlike most other tax free accounts, health reimbursement accounts do not involve employee dollars. Instead, the account acts as an allowance from the employer for qualified health purchases.
The only entity contributing money to an HRA is the employer offering it. So if you have an HRA through Best Company Ever, while you can use the money, all the money is put into the account by Best Company Ever.
What kind of expenses does an HRA cover?
We’ve created a simple example of the kinds of medical expenses an HRA covers. Let’s start off with your deductible and how much your employer put into the HRA.
Your medical deductible: $1,000
Balance in the HRA, contributed by your employer: $1,000
| Eligible Expenses
(paid from the HRA) |
Non-Eligible Expenses
(paid from other source) |
|
|---|---|---|
| Eyeglasses | $150 | |
| Two day hospital stay | $700 | |
| Prescription copays | $250 | |
| Bulk toothpaste pack | $12 | |
| Your remaining deductible | $150 |
*For illustration only. What you can buy with the funds in your pre-tax account is determined by the IRS and your employer. Check your Plan Highlights for more information about your specific plan.
…the account acts as an allowance from the employer for qualified health purchases.
Who owns an HRA?
When you talk about an HRA, you probably say “my HRA”. But an HRA is technically owned by your employer. As such, they define many of the specific rules for an HRA. This means they:
- set up the rules associated with the account
- decides how much money goes into it
- are the ones putting their money into it
- determine what happens to the funds at the end of the year
While employees don’t technically own any of the money in an HRA, they still get to enjoy tax-free purchases on qualified medical expenses.
Interested in learning more about health reimbursement accounts? Check out the difference between HRAs and these two other tax free accounts or review this overview of HRA Basics.
