C-corp owners can use HRAs tax-free, but sole proprietors, partners, and 2%+ S-corp shareholders usually can’t. They’re not considered employees under IRS rules.
HRAs
Health Reimbursement Arrangements (HRAs) are employer-funded accounts that reimburse employees for eligible healthcare expenses. Explore these FAQs to learn how HRAs work, what expenses can be reimbursed, how they differ from FSAs and HSAs, and how plan design affects flexibility and rollover options.
What’s the difference between an HRA and a MERP?
A MERP is a type of HRA used to reimburse part of a deductible. It’s a cost-sharing strategy that helps employers lower premiums while softening the blow for employees.
What happens to my HRA if I leave my job?
In most cases, you lose access to unused HRA funds when leaving a job. Exceptions include retiree HRAs and continued access through COBRA.
Do employees need to submit receipts or documentation for HRA reimbursements?
Yes. Employees must submit receipts or proof of eligible expenses. Employers or administrators are responsible for reviewing claims to ensure compliance with IRS rules.
Can an employee have both an HRA and an HSA?
Generally, no—but employees can have both if the HRA is limited-purpose or post-deductible. These special designs preserve HSA eligibility while offering reimbursement flexibility.
Can HRAs reimburse insurance premiums?
Some HRAs—like ICHRAs, QSEHRAs, and retiree HRAs—can reimburse health insurance premiums. Traditional HRAs may not allow this unless the plan is specifically designed to do so.
Do HRA funds roll over from year to year?
It depends. Employers can choose to allow full, partial, or no rollover of unused HRA funds. This flexibility is one of the key advantages of HRAs.
Are HRAs a COBRA-eligible benefit?
Short answer: Yes. Most HRAs are considered COBRA-eligible group health plans, meaning employees who experience a qualifying event must be offered the option to continue the HRA through COBRA, with limited exceptions.
Who owns the money in an HRA—the employee or the employer?
The employer owns the HRA. Unused funds usually stay with the employer when an employee leaves, unless the plan allows rollover or retiree access.
What can HRA funds be used for?
HRA funds can be used to reimburse eligible medical expenses, but the employer chooses what’s covered. Some HRAs can also reimburse insurance premiums, depending on plan design.
How do HRAs, FSAs, and HSAs differ from one another?
Short answer: HRAs are employer-owned and funded, while HSAs and FSAs involve employee elections. Each account has different rules for ownership, contributions, portability, and how funds are accessed.
What is a Health Reimbursement Arrangement (HRA)?
An HRA is an employer-funded benefit that reimburses employees for medical expenses. Employers control how much is available, what’s eligible, and whether unused funds can roll over.