An HR Glossary for HR Terms

Glossary of Human Resources Management and Employee Benefit Terms

Health Reimbursement Account (HRA)

An HRA Health Reimbursement Account is an employer-funded and employer-owned group benefit for employees to use, tax free, for qualified medical expenses. An employer provides a fixed dollar amount per year available for use on qualified expenses, but employers may offer year-end rollover options.

Here are answers to the most frequently-asked questions regarding HRA Health Reimbursement Accounts.

What Is an Employer Funded Health Reimbursement Account (HRA)?

An employer-funded Health Reimbursement Account (HRA) is a health spending account that is provided to employees of the company. The employer determines maximum yearly amounts and rollover availability. Depending on the policies set up by the employer, the funds in the HRA may pay for eligible medical expenses, such as medical, dental, vision, and pharmacy.

What Is a Health Reimbursement Account (HRA-Based) Medical Plan?

A Health Reimbursement Account (HRA-Based) Medical Plan is another name for an HRA account, as is the term Health Reimbursement Arrangement. HRA account plans are not health insurance, but a way for an employer to pay for their employees’ qualified medical expenses.

Other important details regarding an HRA-Based Medical plan include:

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How Does an HRA Work?

When you join a company, you’ll be informed about any HRA plan benefits and you will be given the option to enroll.

An HRA is not health insurance, but it is a beneficial way to allow employees to pay for a wide range of medical expenses, including those that may not be covered by a typical health insurance plan. An employer decides what medical expenses are covered under the HRA plan (medical, dental, pharmacy, vision, etc.).

Depending on your employer’s HRA plan, qualified expenses can be paid:

Since the HRA plan is employer owned, employees do not take any funds with them should they leave the company.

However, some employers may allow employees to have access to their HRA after retirement.

What Is the Difference Between an HRA and an HSA Insurance Plan?

The difference between an HRA and an HSA insurance plan is that the employer owns and funds an HRA insurance plan and the employee owns a tax-advantaged HSA insurance plan. This means if an employee with an HRA plan leaves their employer, any remaining amount in the HRA defaults to the employer. However, employees take an HSA insurance plan along with them when changing employers.

What Are the Advantages of HRA Plans?

When it comes to advantages of HRA plans, there are plenty for both employers and employees.

Advantages for Employers:

Advantages for Employees:

Can an HRA Be Used to Pay Health Insurance Premiums?

Yes, since the federal government gives employers wide latitude for determining the amount and type of medical expenses that can be covered, employer-funded Health Reimbursement Account (HRA) plans can be used to pay health insurance premiums and long-term care insurance, should employers allow it.

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