Question 1

What is a company HRA and how does it work?

Accepted Answer

A company HRA, or Health Reimbursement Arrangement, is an employer-funded plan that reimburses employees for eligible medical expenses and, in some cases, health insurance premiums. Unlike a Health Savings Account (HSA), the funds are owned by the employer, not the employee, and are not portable. The employer sets the terms, including what expenses are covered and the annual allowance.

Question 2

What are the main types of HRAs offered by employers?

Accepted Answer

There are several main types of company HRAs, each with distinct rules. The most common include: Qualified Small Employer HRA (QSEHRA), designed for small businesses to reimburse employees for individual health insurance premiums and medical expenses; Individual Coverage HRA (ICHRA), which allows employers of any size to reimburse employees for individual health insurance premiums and medical expenses, often as an alternative to offering a group health plan; and Excepted Benefit HRA (EBHRA),

Question 3

Who owns the funds in a company HRA?

Accepted Answer

The funds in a company HRA are exclusively owned and controlled by the employer. Employees do not own the HRA funds, nor do they contribute to them. This means that if an employee leaves their job, they typically forfeit any remaining balance in their HRA, as the funds are not portable. This is a significant difference compared to an HSA, where the funds are employee-owned and remain with the individual even if they change employers or retire.

Question 4

Can I have both a company HRA and an HSA?

Accepted Answer

Generally, having a traditional, general-purpose company HRA will disqualify you from contributing to a Health Savings Account (HSA). This is because an HRA that covers a broad range of medical expenses is typically considered 'other health coverage' that prevents an individual from meeting the HSA eligibility requirement of being covered *only* by a High Deductible Health Plan (HDHP). However, certain 'limited-purpose' HRAs (e.g.

Question 5

What happens to my company HRA if I leave my job?

Accepted Answer

If you leave your job, any funds remaining in your company HRA are typically forfeited. HRAs are not portable, meaning the account and its balance stay with the employer. This is a key distinction from a Health Savings Account (HSA), which is employee-owned and travels with you regardless of employment changes.

Question 6

What exactly is a Healthcare Reimbursement Arrangement (HRA)?

Accepted Answer

A Healthcare Reimbursement Arrangement (HRA) is an employer-funded benefit plan that allows employees to be reimbursed for qualified medical expenses and, in some cases, health insurance premiums. Unlike an HSA, employees cannot contribute to an HRA; only the employer funds it. The primary goal of a company HRA is to help employees manage healthcare costs while offering employers a tax-advantaged way to provide health benefits.

Question 7

How is a company HRA funded, and what expenses does it cover?

Accepted Answer

A company HRA is exclusively funded by the employer; employees cannot contribute to it. The funds are notional, meaning they are not physically held in an account until a reimbursement claim is made. Employers define what expenses are eligible for reimbursement, which can range from standard medical, dental, and vision costs to prescriptions, and even health insurance premiums, depending on the type of HRA.

Question 8

Are there different types of company HRAs an employer can offer?

Accepted Answer

Yes, employers can offer various types of company HRAs, each tailored to different business sizes and benefit strategies. Key types include: Qualified Small Employer HRA (QSEHRA) for small businesses (fewer than 50 employees) that don't offer group health plans; Individual Coverage HRA (ICHRA) for employers of any size to reimburse individual health insurance premiums; and Excepted Benefit HRA (EBHRA) which can be offered alongside traditional group health plans to cover excepted benefits or

Question 9

What are the key advantages of a company HRA for employees?

Accepted Answer

For employees, a company HRA offers several advantages, primarily helping to reduce out-of-pocket healthcare costs. Since HRAs are employer-funded, it's essentially free money for eligible medical expenses or premiums. Reimbursements are generally tax-free, representing a significant financial benefit. HRAs can also provide flexibility, especially with ICHRA, allowing employees to choose their own individual health plans.

Question 10

Do company HRAs have a "use-it-or-lose-it" rule like some FSAs?

Accepted Answer

Unlike many Flexible Spending Accounts (FSAs), which traditionally operate under a 'use-it-or-lose-it' rule by the end of the plan year (though some allow up to $660 carryover for 2025), company HRAs generally allow for the carryover of unused funds from year to year. However, this is ultimately at the discretion of the employer. Employers can set their own carryover policies, including whether funds roll over, if there's a cap on the rollover amount, or if funds are forfeited at year-end.

Question 11

Who determines the terms and conditions of a company HRA?

Accepted Answer

The employer determines the terms and conditions of a company HRA, within the framework of IRS regulations and other federal guidelines. This includes setting the annual reimbursement amount, defining which specific medical expenses are eligible for reimbursement, establishing carryover rules for unused funds, and determining employee eligibility criteria.

Question 12

What are the primary differences between a company HRA and a Health Savings Account (HSA)?

Accepted Answer

The primary differences between a company HRA and an HSA lie in funding, ownership, and portability. A company HRA is employer-funded only, and the funds remain the property of the employer, meaning they are not portable if you change jobs. Reimbursements are generally tax-free. An HSA, however, can be funded by both employer and employee, the funds are employee-owned, portable, and can be invested.

Question 13

Can I contribute to an HSA if I'm covered by a company HRA in 2026?

Accepted Answer

Whether you can contribute to an HSA while covered by a company HRA in 2026 depends entirely on the type and design of the HRA. A general-purpose HRA that covers a wide range of medical expenses will typically disqualify you from making HSA contributions because it's considered 'other health coverage.' However, if your company HRA is specifically designed as a 'limited-purpose HRA' (e.g.

Question 14

What are the 2026 contribution limits for HSAs and various HRAs?

Accepted Answer

For 2026, the HSA contribution limits are $4,400 for individuals and $8,750 for families, with an additional $1,000 catch-up contribution for those age 55 and over. HRA limits vary by type: the Qualified Small Employer HRA (QSEHRA) limits are $6,450 for single employees and $13,100 for families. The Excepted Benefit HRA (EBHRA) has an annual limit of $2,200.

Question 15

How do eligibility requirements for HRAs and HSAs differ?

Accepted Answer

Eligibility requirements for HRAs and HSAs differ significantly. To be eligible for an HSA, an individual must be covered by a High Deductible Health Plan (HDHP) and generally have no other health coverage (with some exceptions) and not be enrolled in Medicare. For 2026, an HDHP must have a minimum deductible of $1,700 for individuals and $3,400 for families, with maximum out-of-pocket limits of $8,500 for individuals and $17,000 for families.

Question 16

Is a company HRA portable if I change employers, unlike an HSA?

Accepted Answer

No, a company HRA is not portable if you change employers. The funds in an HRA are owned by the employer, not the employee, and are tied to your employment with that specific company. If you leave your job, any remaining balance in your HRA is typically forfeited. This is a fundamental difference from an HSA, which is an individual account that you own and can take with you from job to job, or even into retirement.

Question 17

Which offers more long-term savings potential: an HRA or an HSA?

Accepted Answer

For long-term savings potential, an HSA generally offers more advantages than a company HRA. HSAs are employee-owned, portable, and offer a triple tax advantage: tax-deductible contributions, tax-free growth through investments, and tax-free withdrawals for qualified medical expenses. This allows HSAs to function as a powerful retirement savings vehicle specifically for healthcare costs.

Question 18

What are the 2026 contribution limits for a Qualified Small Employer HRA (QSEHRA)?

Accepted Answer

For 2026, the contribution limits for a Qualified Small Employer HRA (QSEHRA) are $6,450 for single employees and $13,100 for employees with family coverage. These limits are set by the IRS and represent the maximum amount an employer can reimburse an eligible employee through a QSEHRA in a given year.

Question 19

How does an Individual Coverage HRA (ICHRA) work, and are there contribution limits in 2026?

Accepted Answer

An Individual Coverage HRA (ICHRA) allows employers of any size to reimburse employees for individual health insurance premiums and qualified medical expenses. Employees must be enrolled in individual health insurance coverage (not a group plan) to use an ICHRA. A key feature of ICHRA is that there are no federal contribution limits for 2026, meaning employers can set their own allowance amounts.

Question 20

What is an Excepted Benefit HRA (EBHRA), and what are its 2026 limits?

Accepted Answer

An Excepted Benefit HRA (EBHRA) is a type of company HRA that can be offered alongside a traditional group health plan, not as a standalone benefit. It's designed to reimburse employees for certain 'excepted benefits' like dental or vision care, or other medical expenses up to a limited amount, provided the employee is offered a non-HRA group health plan. For 2026, the annual maximum contribution limit for an EBHRA is $2,200.

Question 21

What are the HDHP requirements for HSA eligibility in 2026, and how do they relate to HRAs?

Accepted Answer

For 2026, to be eligible for an HSA, an individual must be covered by a High Deductible Health Plan (HDHP) with a minimum deductible of $1,700 for individuals and $3,400 for families. The maximum out-of-pocket limits for an HDHP are $8,500 for individuals and $17,000 for families. These requirements are crucial when considering a company HRA. A general-purpose HRA that covers expenses before the HDHP deductible is met typically disqualifies an individual from contributing to an HSA.

Question 22

Can self-employed individuals benefit from a company HRA?

Accepted Answer

Self-employed individuals generally cannot directly benefit from a company HRA in the same way a W2 employee would, as HRAs are employer-sponsored benefits. However, if a self-employed individual has employees, they can establish a company HRA for their employees. For example, a small business owner could implement a QSEHRA or ICHRA to reimburse their employees for health insurance premiums and medical expenses, thereby providing a valuable benefit while optimizing their own business's tax

Question 23

Have there been recent IRS changes affecting HRAs for plan years after 2024?

Accepted Answer

Yes, there have been IRS amendments to HRAs that apply to plan years beginning after December 31, 2024. These changes often relate to the integration of HRAs with other health plans, specific eligibility criteria, and administrative requirements. While the core structure of HRAs like QSEHRA, ICHRA, and EBHRA remains, employers and HR benefits managers need to stay updated on these amendments to ensure their company HRA plans remain compliant and effectively serve their employees.

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Quick Answers

What is a company HRA and how does it work?

What are the main types of HRAs offered by employers?

Who owns the funds in a company HRA?

Can I have both a company HRA and an HSA?

What happens to my company HRA if I leave my job?

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