An HRA (Health Reimbursement Account) is an account set aside to help you pay for qualified health care services and eligible medical expenses. It is typically connected with a health plan. You do not contribute money to this account, only your employer, therefore you do not own the account or the money in the account. You do not pay any federal or state income taxes on this money.
Your employer may put all the contribution into the account in 1 lump sum at the beginning of the year or they may choose to do it monthly. There is no limit for you since you don’t contribute to this account. Your employer can limit the amount of carry over allowed.
You cannot cash out this account. If you don’t use it and leave your employment, the account stays with your employer.
Qualified Medical Expense: a health care service, treatment or item that the IRS says can be purchased without having to pay taxes.
Eligible Medical Expense: a health care service, treatment or item that the IRS says can be covered or reimbursed (paid back) by a benefit plan.
Next week: Side by side comparison of FSA, HRA and HSA.