Health Reimbursement Arrangements (HRAs) were created by Revenue Ruling 2002-41 issued by the Internal Revenue Service (IRS) on June 26, 2002. They have steadily gained in popularity, evidenced by the high demand for Significa Benefit Services administrative expertise with HRAs.
Under an HRA, a predetermined amount of funds are held in individual accounts by the employer for reimbursements of IRS-approved medical expenses, not covered elsewhere, which are incurred by employees, their spouses and dependents.
The employer must fund the HRA; no employee contributions are allowed. In addition, the employer can, but is not required to permit roll over of unused balances to the next and subsequent benefit years.
The “integrated” HRA plan design is the most popular. Generally, employers contract with insurance companies to provide group health coverage with higher deductibles and lower premiums. The premium savings are used to fund the HRA, and reimbursements are limited to all or a portion of the higher deductibles.