What is an HRA?
An health reimbursement arrangement (HRA), sometimes called a health reimbursement account, is a type of health care account, not an insurance plan, which is funded entirely by your employer; employees cannot contribute to an HRA. It is designed to reimburse an employee for eligible medical expenses as defined under IRS Code 213(d).
Examples of eligible expenses include medical, dental and vision deductibles, insurance premiums, copayments and coinsurance as well as pharmacy expenses and some over-the-counter medicines incurred by the employee, his or her spouse and/or dependents, though your plan may limit which expenses are eligible.
Health Reimbursement Arrangement Account Basics
The employer funds deposited into the account are not considered part of your income and therefore are not subject to income, FICA or worker’s compensation tax. Basically, it is tax free money to be used for qualified medical expenses.
Participating in an HRA is a great way to stretch your health care budget in a couple of different ways. First, an HRA typically sits alongside a health plan with higher deductible, coinsurance and copayments; these plans often times have lower monthly medical premiums allowing you to save money. Second, some employers allow you to rollover and thus save unused funds year after year. The more you save in your HRA, the more you will have when you need it. An employer may also make the HRA portable so that you can take the funds with you from employer to employer and even into retirement.
- Funding. Your employer contributes to your HRA upfront or on a pre-determined schedule throughout the year. (Please contact your Human Resources office for a copy of your employer’s contribution schedule.)
- Accessing Funds. When you have an eligible health care expense, pay for them with your payment card, or pay out-of-pocket and request reimbursement online. Remember to always keep your receipts.
- Requesting Reimbursement/Substantiating Purchases: It’s quick and easy to request reimbursement for eligible expenses paid using personal funds, or to submit documentation for card purchases. Our documentation upload features online and on the mobile app will save you time and make your life easier. Mobile App Upload – Take a photo with your phone’s camera and the image is submitted in seconds. Online Upload – Log in to your online account, then browse and upload scanned images directly to your claim. No need for faxing or mailing, and the image is saved with your claim as a record of submission. Please remember that credit card receipts, non-itemized cash register receipts and cancelled checks are not acceptable forms of documentation.
- Reimbursement Claims Processing. We will promptly process your request and reimburse you either by check or direct deposit if you sign up for that feature. Please note that you will receive your money sooner if you use direct deposit.
- Account Management. Log on to your account regularly to check your account balance and access health education tools.
No. One of the main differences between the HRA and the FSA is the funding. HRAs are funded solely through employer contributions while FSAs are typically funded by the employee, usually through pre-tax,payroll deductions. You can have both accounts.
If you choose to have an FSA and HRA, then expenses eligible under both accounts will usually be reimbursed through the FSA first, then default to the HRA. Contact your Human Resources office for the specifics of your plan.
HRA Eligible Expenses
HRA funds are mandated by the IRS to be used for health care expenditures only. Approved health care expenditures include those expenses defined by your employer that comply with Section 213(d) Medical Expenses as defined in the IRS code. These expenses may include deductibles, coinsurance, copayments, prescription drugs, vision care and dental care. Your employer may limit what expenses your plan reimburses; please consult with your Human Resources office for more information or call Customer Service.
For a list of IRS approved health care expenditures, please refer to Qualified Medical Expenses. Please keep in mind that your employer might have additional limitations.
Examples of expenses that are not eligible for reimbursement include gym memberships, nutritional supplements, cosmetic procedures and surgeries. Please refer to Qualified Medical Expenses to find a general list of non-eligible expenses, excerpted from IRS Publication 502.
- Medical expenses that are not defined as eligible under your employer’s plan;
- Medical expenses that do not meet IRS section 213(d) requirements;
- Medical expenses incurred by you, your spouse or any eligible dependents prior to your effective date in the program; and,
- Medical expenses that can be reimbursed to you through any other source such as group health insurance.
If you file a manual request for reimbursement of a non-eligible expense, the request will be denied. If you used the payment card and the expense is deemed ineligible after the expense is already paid, you will be required to reimburse your account for that transaction. If you fail to reimburse the account, you may be required to pay income taxes.
Contributions and Tax Information
The annual contribution is determined by you employer. Please see your plan documents or consult with your Human Resources office for more information.
An employer may include an account cap or limit on the total balance that you can accumulate in the HRA at any given time. No additional contributions will accrue until the account is used and the balance falls below the cap. Please see your plan documents or consult with your Human Resources office for more information.
An employer may include an HRA rollover maximum which is a limit on the available balance that you can carry over from one year to the next. Please see your plan documents or consult with your Human Resources office for more information.
We do not supply information to the IRS related to an individual HRA. The plan sponsor, your employer, may be required to file an IRS form 5500 which includes participation and total disbursement information (does not include individual HRA information).
Using Your Health Reimbursement Arrangement
You will receive a payment card to access your HRA. You can also pay for eligible expenses with any other form of payment and request reimbursement from your account.
You have access to the account when your plan becomes effective. However, you will only be reimbursed for the balance available at the time of your request. Any unpaid amount will be paid as additional contributions are credited to the account, up to the annual amount. Services must be rendered before they are reimbursed.
Account Balance and Claims Status information is available three ways:
- Use the mobile app, CYC mobile, or log on to your online account at any time for balance information. Your mobile and online accounts are secure and updated in real time.
- Call the Customer Service line at any time for automated balance information.
- Customer Service representatives are available to assist you via phone or email during extended business hours.
Manual reimbursement requests that exceed your account balance will be reimbursed up to the amount available in the account. You will continue to be reimbursed as additional contributions are made according to the reimbursement schedule set up by your employer.
No. The HRA is an employer provided plan. However, there are valid changes in status associated with your underlying health plan coverage that may affect your HRA participation.
An employer may allow an employee to continue to incur expenses and thus spend down their account after termination. If they do not, COBRA coverage must be offered. At termination of employment, your payment card will be deactivated. You may still access funds for services incurred before your termination date and while you were covered under the plan, but your reimbursement request must be made manually. You are not eligible to use the funds for services incurred after your HRA terminates. Therefore, you may forfeit some of your funds.
Some HRAs may be set up to be portable which means you retain ownership of the funds after you leave the company. Please see your company’s plan documents for more information.