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Health Reimbursement Arrangement (HRA)
An employer-funded account that reimburses employees for qualified medical expenses tax-free.
Full Definition
A Health Reimbursement Arrangement (HRA) is an employer-funded benefit that reimburses employees for qualified medical expenses and sometimes insurance premiums, tax-free. Unlike HSAs, HRAs are owned and funded entirely by the employer — employees cannot contribute. The most common types include: traditional HRA (used alongside employer group coverage), Individual Coverage HRA (ICHRA — reimburses employees for individual marketplace premiums), and Qualified Small Employer HRA (QSEHRA — for employers with fewer than 50 employees). HRA funds not used by year-end may roll over depending on plan design. HRA reimbursements are not taxable income to the employee.
Real-World Example
A small employer with 10 employees cannot afford group health insurance. Instead, they establish a QSEHRA contributing $400/month per employee. Each employee purchases their own individual marketplace plan and submits receipts. The employer reimburses up to $400/month tax-free, and the employee's out-of-pocket premium cost is reduced accordingly.
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