With health care premiums continuously increasing, employers have been forced to reduce medical benefits offered, as well as, shift the financial responsibility to their employees. One way employers have been able to make this transition and subsidize medical costs is by setting up a HRA. HRAs are sanctioned programs that allow employers to compensate medical expenses paid by participating employees.

With a HRA, employers fund individual accounts that function to reimburse medical expenses incurred by employees. Examples of qualified expenses include insurance premiums, deductibles, copayments, and prescription drugs.

What are the benefits for employers and employees who utilize HRAs?

Employers:
o Any qualified reimbursements are tax-deductible.
o Forces employees to become more cognizant of medical expenses, and as a result, may lessen medical claims and expenses.

Employees:
o Contributions by employers are separate from their income.
o Depending on whether or not an employer elects to rollover unused funds to the next year, employees can use these funds to offset future catastrophic events.