A Health Reimbursement Arrangement (HRA) is an employer-funded, tax-advantaged health benefit plan that reimburses employees for out-of-pocket medical expenses and individual health insurance premiums. HRAs allow the employer to make deposits on their employee and/or retiree’s behalf. The employer and employee both save 7.65% in FICA taxes and funds carry over year-to-year. Deposits, accumulation, and reimbursements are all tax-free.
There are three types of HRA – HRA that is funded at retirement, HRA that is funded during employment, for use at retirement and HRA that is funded during employment, for immediate use to offset health care costs while employed.
For active employees, HRAs can be great as a rainy-day fund. If they need it, it’s there! If not, then it rolls over to the next year and grows— tax-free.
An HRA is funded by the employer to:
- Offset the rising cost of health care
- Bridge any gap between retirement and Medicare eligibility
- Offer employees a tax-free way to pay for eligible medical expenses during retirement or active employment
Our HRA can also supplement our Special Pay Plan by providing additional tax-advantaged funds to pay for the cost of rising medical expenses during retirement.