Employer-funded plans that reimburse employees for incurred medical expenses that are not covered by the company’s standard insurance plan. Because the employer funds the plan, any distributions are considered tax deductible (to the employer). Reimbursement dollars received by the employee are generally tax free.
What is a Health Reimbursement Account (HRA)?
The HRA is an employer-sponsored plan that can be used to reimburse a portion of you and your eligible family member’s out-of-pocket medical expenses, such as deductibles, coinsurance and pharmacy expenses. It is not an insurance program, but a financial reimbursement plan funded entirely by your employer. Your employer has designated a specific dollar amount to credit to the account (either monthly or annual contributions). You choose which out-of-pocket qualified medical expenses you would like to submit for reimbursement. Unused account balances will be rolled over to the following plan year provided your employer continues to offer the program and you remain enrolled in it.
What are the tax advantages of an HRA?
Reimbursements made from your employer through the HRA are not considered part of your income and are not taxed.
Is the HRA part of my health benefits plan?
The HRA is not insurance, nor part of the health benefit plan. It is a separate program offered under separate terms and conditions as defined by your employer.
What medical expenses can be reimbursed from the HRA?
Qualified medical expenses include those expenses defined by your employer that comply with section 213(d) of the Internal Revenue Code. These expenses may include deductibles, coinsurance, prescription drugs, vision care and dental care. To determine if an expense is eligible for reimbursement under your employer’s plan, please refer to your employer’s summary plan description or contact our Spending Account Administration department. You can find a general list of IRS-approved health-related reimbursements in Publication 502, which is accessible online at www.irs.gov. Please remember that eligible medical expenses may vary by employer. Please remember Publication 502 lists expenses eligible for a tax credit at the end of the tax year. Some of the expenses listed may not be eligible for reimbursement from your HRA plan. Because eligible medical expenses may also vary by employer, you should verify the eligibility of any questionable expense with your Benefit Administrator before submitting your HRA expense.
What expenses are typically not reimbursable ?
• Medical expenses that are not defined as eligible expenses by your employer
• Medical expenses that do not meet IRS section 213(d) requirements
• Medical expenses incurred by you or your spouse or eligible dependents before your participation in the program was effective
• Medical expenses that can be reimbursed to you through any other source, such as group health insurance or a self funded group health plan.
• Examples of expenses that are not eligible for reimbursement include nutritional supplements, illegal operations and treatment, health club dues and cosmetic surgery (unless medically necessary). You can find a general list of IRS non-eligible health-related expenses in Publication 502, which is accessible online at www.irs.gov.
If I have an HRA and an FSA through BCBSF, which account will be used?
The HRA and Health Care FSA, while separate accounts, provide reimbursement of qualified medical expenses as defined by your employer and the IRS (i.e., deductibles, coinsurance, prescription expenses). Should you have both accounts, expenses eligible under both plans will be reimbursed through the Health Care FSA first, then default to the HRA.
Can I be reimbursed for my dependents’ medical expenses?
Yes, as long as your dependent meets the definition of a dependent as defined by the IRS and is included in your employer’s plan.
What happens to my account(s) when I’m on a leave of absence?
This depends your employer’s leave policy and the provisions outlined in your employer’s Summary Plan
Description. Generally, the employer will continue to make contributions to the plan, if an employee is receiving extended illness pay or vacation. However, if an employee is not being paid, they will not make contributions to the plan. Medical and/or dependent care expenses incurred during leave where contributions have not been made will be ineligible for reimbursement.
What happens to my account(s) if I terminate employment?
You will have a limited period of time to submit additional requests for reimbursement of qualified medical expenses incurred while you were employed, and, at the end of that period, the account balance will be forfeited. In certain circumstances, you may be eligible to elect continuation of coverage under COBRA. Please refer to your employer-provided Summary Plan Description for details of your employer’s program.