If you are an employer or currently being employed, knowing about the Health Reimbursement Account (HRA) (also known as the Health Reimbursement Arrangement may be extremely beneficial, allowing you to save a huge portion of costs spent on medical-related expenses.
The Health Reimbursement Account (HRA) is another type of savings account for medical expenses. They allow both employees as well as their employers to save money on healthcare-related expenses. Basically, HRAs allow employers to set aside funds for employees to pay for medical expenses each year; this allows employers to return the paid expenses of employees, resulting in tax savings. HRAs are known to be one of the most flexible type of health-related savings account, and have been extremely popular for employers.
There are several conditions that must be met, however, to qualify for an HRA. A Health Reimbursement Account must be completely funded by the employer and these funds may not come from employees’ salaries. In addition, the plan can only be counted towards qualified medical expenses, similar to those of a health savings account or flexible spending account.
Usually, HRAs are offered along with a High Deductible Health Plan (HDHP). Generally, switching to a HDHP results in lower premium costs, allowing employers to save on medical expenses. Savings from these lower premium costs can then be used on the HRA. One huge benefit of an HRA is that all deposited funds, whether it be from the employer or the employee, are completely tax deductible or tax-free, respectively.
Employers can decide what expenses they want to cover; this can be defined as something as broad as all health-related costs or something specific like just emergency room costs. Once again, HRAs are extremely flexible and allow employers to both save money as well as providing great benefits to their employees.
Employers may also choose to allow HRA plans for former retired employees as well as their direct family. In fact, an HRA can replace general retiree healthcare, allowing the employer to save a lot of money. HRAs are also attractive to prospective employees, as well as contributing to good public relations.
Once again, HRAs can be a very good choice for employers, with numerous benefits to both employees as well as the employer.