Breaking Down HRA Plan Types
A Health Reimbursement Arrangement (HRA) is a tax-advantaged health benefit funded and owned by employers. Depending on the type of HRA, employees can use money from the account to pay for IRS-approved healthcare expenses and health insurance premiums and it does not count toward their taxable income.
Learn more about HRA plan types:
HRA Plan Types
Standard HRA
- Usually linked to a group health insurance plan
- Employees must be enrolled in the group health insurance plan to have the HRA
- Unused funds can’t be rolled over to the following year
- Standard HRAs cannot be used to pay insurance premiums, only IRS-approved qualified medical expenses
Individual Coverage HRA (ICHRA)
- Can be offered as a stand-alone benefit or as part of the overall company health benefits plan
- Funds can be used for health insurance premiums and IRS-approved medical expenses not covered by insurance
- Employers can offer an ICHRA alongside a traditional group plan as long as both options aren’t offered to the same class of employees
- Some employees may be excluded, based on job status or geographic location
Excepted Benefits HRA (EBHRA)
- An “excepted benefit” is a type of coverage (dental, vision, etc.) not integral to a major medical health plan
- Enrollment in a group or individual health plan is not required to qualify for enrollment in an EBHRA
- Employers sponsoring an EBHRA must offer employees the option to enroll in a non-excepted major medical plan at the same time
- The funds can only be used for medical care expenses, COBRA insurance premiums, or healthcare premiums for an excepted benefit
Qualified Small Employer HRA (QSEHRA)
- For companies with fewer than 50 full-time employees
- Funds can be used for approved medical expenses and healthcare insurance premiums
- Tax-free only for employees covered by a major medical policy providing minimum essential coverage (MEC)
- Employers can contribute different amounts to single employees versus those with a family, and some employees may be excluded (such as part-time and seasonal workers)
Retiree HRA
- Funds are used to pay for qualified medical expenses and health insurance premiums during retirement
- Account holders must be of normal retirement age and fully retired
- The account grows through ongoing employer contributions and investment earnings
- Allows some employees to retire before reaching Medicare age (65) by helping pay for insurance premiums during retirement
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