What is a Health Reimbursement Arrangement (HRA), and who funds it?

• A. An HRA is an employer-funded account used to reimburse employees for eligible medical expenses.
• B. An HRA is funded by the government.
• C. Funds in an HRA automatically roll over every year.
• D. An HRA is a savings account owned by the employee.

Answer: (A)

A Health Reimbursement Arrangement is a plan funded by the employer that reimburses employees for eligible medical expenses. The employer establishes and funds the HRA, and employees don’t contribute to it. Reimbursements are provided for qualified medical costs up to the plan’s limits, and these reimbursements usually receive favorable tax treatment. The money in an HRA is owned by the employer and stays within the plan according to its rules; whether any unused funds roll over from year to year depends on the specific plan design. HRAs are not funded by the government, nor are they the employee’s personal savings account.