Health reimbursement accounts (HRAs) are a way for employers to help offset their employees’ health care costs and gain tax advantages.

A valuable investment
Augmenting a benefits package with an HRA sends a strong message to employees that their employer cares about their health and well-being, helping employers attract and retain staff. Benefits for employers and employees:

• Control — Employers decide how much to contribute and what medical expenses it can be used for. Employees control how best to spend their health care dollars.
• Tax savings — Employer contributions are tax-deductible, lowering their payroll taxes. Funds are also tax-free to employees, so they don’t increase their income tax burden.
• Flexibility — Employers choose whether to allow funds to carry over each year. And the money stays with the organization when employees leave.
• Productivity — Healthy and happy employees are more engaged in their work and better for the bottom line.

How it works
With an HRA, employers contribute money for each employee to pay for out-of-pocket medical costs. Employers can choose whether to allow the funds to be used for all eligible medical expenses approved by the IRS or a subset of eligible expenses.

When employees incur eligible medical expenses, they can submit claims to be reimbursed from the HRA.