What is an HRA?
A Health Reimbursement Arrangement is an Employer Funded plan whereby the employer promises to reimburse certain out-of-pocket medical, dental, and/or vision expenses provided for in the Internal Revenue Code Section 213(d). Section 105 of the Internal Revenue Code permits HRA reimbursements to be made to employee participants on a pre-tax basis. Such payments are deductible by the Employer as a business expense.
WHY USE AN HRA??
*Employer Cost Savings*
The main reason to utilize a Health Reimbursement Arrangement is to allow you to select a less costly medical insurance plan while protecting your employees from paying for large out-of-pocket expense amounts. In addition, all employer contributions to the plan are 100% tax-deductible.
*Plan Premium Savings*
*100% Tax Deductible*
*Client Case Study*
Company Z with 97 employees saved over $840,000 by switching from a $10 co-pay plan to a high deductible plan and reimbursing all of the out-of-pocket expenses that were incurred by their employees through a Health Reimbursement Arrangement.
*Tax Advantages for Employees*
HRA funds used to pay for eligible expenses for employees are done so on a pre-tax basis; therefore, the funds are not taxable to the employee. There is no need to claim income tax deductions for any expenses reimbursed under the HRA.