Part 9: HRA Secrets Revealed — The Employer-Funded Benefit That Can Save You Thousands

HRA Secrets Revealed — The Employer-Funded Benefit That Can Save You Thousands

Unlike HSAs and FSAs, HRAs are funded entirely by employers — not employees.
Yet most workers don’t realize how flexible and powerful HRAs can be, especially when combined with a high-deductible health plan (HDHP) or when structured as a limited, post-deductible, or retiree plan.

1️⃣ What Exactly Is an HRA?

A Health Reimbursement Arrangement (HRA) is an employer-funded account that reimburses employees for qualified medical expenses.
Key feature: You cannot contribute your own money. Only the employer can reimburse or pre-fund it.

HRAs typically reimburse:

• Deductibles
• Copays
• Coinsurance
• Prescription costs
• Certain insurance premiums (depending on the HRA type)

2️⃣ Major Types of HRAs

Employers can choose from several HRA structures — each with different rules and levels of flexibility.

🔹 Traditional HRA

Reimburses medical expenses and sometimes premiums.
Often paired with a group health plan.
Not HSA-compatible unless structured as limited or post-deductible.

🔹 Limited-Purpose HRA

Covers only dental, vision, and preventive care.
Designed to be HSA-compatible.

🔹 Post-Deductible HRA

Reimburses expenses only after the employee meets the minimum HDHP deductible.
Also HSA-compatible.

🔹 Retiree HRA

Reimburses expenses after retirement.
Does not interfere with prior HSA eligibility.

🔹 ICHRA (Individual Coverage HRA)

Allows employers to reimburse individual plan premiums instead of offering group insurance.

🔹 QSEHRA

For small employers (<50 employees). Reimburses individual plan premiums and medical expenses. Annual reimbursement limits are set by the IRS.

3️⃣ How HRA Reimbursements Work

Employees request reimbursement by submitting:

• A valid receipt
• Date of service
• Description of the medical service
• Proof of payment

Employers then reimburse the expense tax-free.
Unused HRA funds may:

• Roll over (if employer allows), or
• Expire at year-end (employer choice)

4️⃣ How HRAs Affect Your HSA Eligibility

HRAs are one of the biggest sources of HSA confusion.
The key rule:

Traditional HRAs generally disqualify you from making HSA contributions.

However, these HRA types are HSA-compatible:

• Limited-purpose HRA
• Post-deductible HRA
• Suspended HRA (employee waives general reimbursement)
• Retiree HRA

5️⃣ What Expenses Are Reimbursable?

HRAs can reimburse any medical expense allowed under Section 213(d), including:

• Doctor visits
• Hospital bills
• Prescription drugs
• Dental & vision care
• Mental health treatment
• Insurance premiums (depending on HRA type)

Cosmetic procedures and non-medical wellness items are typically excluded unless medically necessary.

6️⃣ Real-Life Examples — Smart Use of HRAs

💬 Frequently Asked Questions