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HR Party of One is brought to you by BerniePortal.
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In this episode, we’ll discuss: What an HRA Is
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The Essential Benefits of HRAs The Different Types of HRAs
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Eligibility and Enrollment Requirements for HRAs
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and; Key Features of HRAs Let’s get started!
What Is an HRA?
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-What Is an HRA? A Health Reimbursement Arrangement,
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or HRA, is an employer-funded account that reimburses employees for qualified
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medical expenses. Employees typically pay for medical services up-front and then
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submit proof of payment to their employer, who reimburses them with tax-free funds.
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Many employers are moving toward offering high-deductible health
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plans (HDHPs) to lower the cost of their healthcare offerings. However,
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these plans can lead to higher out-of-pocket expenses for employees, which can create
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dissatisfaction or financial stress. By offering an HRA alongside an HDHP, employers can continue
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to remain competitive in the talent hunt by helping employees manage healthcare costs.
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The employer sets the terms regarding what expenses the HRA can cover. For example,
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employers can choose to cover a wide range of services such as employee insurance premiums,
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doctor’s visits, prescriptions, medical devices, and dental work.
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These coverages help employees offset the out-of-pocket costs
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that coincide with high-deductible health plans.
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Now that we've explored how HRAs work and how they can complement high-deductible health plans,
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let’s take a closer look at the key benefits they offer to both employers and employees.
Essential Benefits of HRAs
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Essential Benefits of HRAs. HRAs offer several key benefits
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that both employers and employees can take advantage of. For employers,
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contributions to HRAs are tax-deductible as a business expense, while employees benefit from
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tax-free reimbursements for medical expenses. This means that neither employers nor employees incur
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any tax liability on the funds in the account. HRAs also provide significant flexibility for
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employers, who can set contribution amounts, determine which medical expenses are covered,
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and adjust the plan to meet the specific needs of their workforce.
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Additionally, unlike HSAs and FSAs, which require employees to contribute part of their paycheck,
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HRAs are fully funded by the employer, meaning employees don’t need to spend their own money
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to benefit from the plan. To gain a clearer understanding of the differences between HRAs,
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HSAs, and FSAs, be sure to explore the resources linked in the description below.
Types of HRAs
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Now that we’ve unpacked the key features of HRAs,
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let’s dive into the different types available. There’s no one-size-fits-all solution,
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and depending on your company size and employee insurance elections, the right HRA can vary.
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Types of HRAs
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There are several types of HRAs available, each with its own set of features and eligibility
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requirements. Let’s take a closer look at the three most common options:
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Integrated HRA: An integrated HRA is linked
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to an employer’s health insurance plan. Employees need to be enrolled in the employer’s group health
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insurance to use this type of HRA. It’s often used to help cover out-of-pocket costs that
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come with a traditional health insurance plan, like deductibles and copayments.
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Individual Coverage HRA (ICHRA):
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The ICHRA is a more flexible option. Employees can use an Individual Coverage HRA with health
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plans purchased through the Marketplace or other qualified health plans. With an ICHRA,
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employees can use the funds to pay for individual health insurance premiums. This
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type of HRA is ideal for businesses that want to offer employees more options for
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health insurance without having to deal with the complexities of traditional group plans.
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Qualified Small Employer HRA (QSEHRA):
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For small businesses with fewer than 50 employees, the QSEHRA is a great
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option. QSEHRAs allow small employers to offer health benefits without acquiring unexpected
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healthcare costs. The contribution limit for QSEHRAs is monitored by the IRS annually.
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For:
2025
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family coverage, it’s $12,800. For information on QSEHRAs,
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check out the respective blog linked in the description.
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Now that we’ve explored the different types of HRAs, let’s turn our attention
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to who can actually take advantage of these benefits. Understanding eligibility and
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enrollment requirements is key to making sure your employees get the most out of their HRA options.
HRA Eligibility and Enrollment
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HRA Eligibility and Enrollment To qualify for an HRA, employees
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typically need to have health insurance that aligns with their employer's plan. For instance,
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with an integrated HRA, employees must be enrolled in their employer's group health
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insurance plan. In contrast, an Individual Coverage HRA (ICHRA) offers more flexibility,
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allowing employees to use individual health plans purchased through the marketplace or other
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qualifying health plans. As for eligibility, HRAs are generally available to full-time employees,
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although some employers may choose to extend coverage to part-time workers or contractors.
Using a TPA or Third-Party Administrator
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Third-party administrators, or TPAs, handle HRA administration for you, so you don't have to
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stress about the additional work load. Our sister company, Alpine, makes benefits management easy by
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offering comprehensive solutions for FSAs, HSAs, HRAs, commuter benefits, and COBRA—all in one
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place. With Alpine, our clients save time, reduce administrative burden, and ensure compliance,
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so they can focus on what matters most—the success of their organization and people.
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It's important to remember that benefits enrollment and eligibility questions from
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your employees can be handled by your broker! Your broker is there to help and can handle
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those questions so that you don't have to. And, if you keep all benefits information stored in a
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benadmin feature, like BerniePortal's, employees can get the answers they need at any time.
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It's easy to get bogged down by employee questions, but it's even easier to redirect
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them to the proper source, whether that be your broker or information accessible to them in your
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HRIS. It's important to reduce the time you spend on EFATs (employee facing administrative
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tasks) so you can focus on more important initiatives, move up the HR hierarchy of needs,
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and grow your career in the process. The first step to doing this well is to use our Rhythms of
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HR tool, which you can download on our website. I’ll put a link in the description so you can
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download this resource. We also have more in depth videos on EFATs and the HR Hierarchy
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of Needs linked in the description for you. Now, let’s get into the key features of HRAs.
Key Features of HRAs
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Key Features of HRAs When it comes to maximizing
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the value of your HRAs, understanding the key features—like contribution limits, rollover
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options, and more—can make all the difference. With Alpine handling the administrative side,
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you can focus on these important details that really set HRAs apart and create lasting benefits
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for both your employees and your organization. Contribution limits, rollover capability,
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and portability are what really set HRAs apart, so let’s break down those features.
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Contribution Limits: HRAs come with different
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contribution limits depending on the type of plan. For standard HRAs and ICHRAs, there are generally
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no annual contribution limits, meaning employers can contribute as much as they want. On the other
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hand, QSEHRAs have annual contribution limits set by the IRS. Under the Affordable Care Act, the IRS
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set contribution limits for QSEHRAs to ensure that small businesses do not inadvertently offer a plan
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that could be considered a substitute for group health insurance. The idea is to encourage small
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businesses to provide a meaningful benefit to their employees without distorting
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the health insurance marketplace or avoiding regulatory requirements for larger businesses.
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Rollover Capability: One of the best features
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of an HRA is the rollover option. If you don’t use all of the monthly contribution,
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the leftover funds often roll over to the next month. In some cases, unused funds can
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even roll over from year to year. However, keep in mind that some HRAs may require employees to
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use the funds by the end of the calendar year, so be sure to check the details of your plan.
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Portability: HRAs are not portable. This
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means that if you leave your job, you generally lose access to any remaining funds in your HRA.
Final Thoughts
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Well, there you have it! We've simplified everything you need to know about HRAs and
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their potential to drive real value for your company. While they may seem ‘too good to be
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true,’ HRAs are a smart, tax-free way to help cover medical expenses,
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giving both employers and employees a win-win solution.
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If you’re still curious about HRAs or have questions like 'Can an employee have both
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an HSA and an HRA?', be sure to check out the resources linked below. We have plenty
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of resources to help you dive deeper into these benefits and make informed decisions.
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At the end of the day, offering HRAs is a strategic move that can improve employee
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satisfaction, reduce company costs, and enhance your company’s benefits package. Remember—your
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role is as strategic as you make it!
