If you do not know already, HRA stands for health reimbursement arrangement. HRAs allow a company to reimburse for medical expenses and/or insurance costs on a tax-free basis. Under this arrangement, employees purchase their own health insurance on the open market and then submit states their employer to obtain reimbursed for the cost of their premium and when allowed, all qualified medical expenses. Let's look more closely in the HRA and how it all works.
HRA: a crash course
An HRA is really a tax-advantaged tool built on the number of regulations that can help to ensure it is on offer fairly and achieving its intended aim, which is to help employees purchase benefits tax-free.
An HRA works virtually exactly how it sounds: the business reimburses for premiums and medical expenses on a tax-free basis, and also the employee chooses an agenda that matches their needs. Workers are reimbursed once they submit claims.
Here's even more information on how HRAs work!
There are some HRAs currently available, but there's two major types of HRAs that business people ought to know about. They are
ICHRA (individual coverage HRA), a 401(K) style benefit solution without any company size limitations or reimbursement limits, and QSEHRA (qualified small employer HRA), that is created for companies with under 50 employees.
Here's what you ought to know of the HRA types.
Our small company tax strategy HRA guide can help direct you towards the best one for the business.
HRA benefits
There are lots of advantages of any adverse health reimbursement arrangement.
- Funded entirely by Employer (no employee contributions)
- Account owned by Employer- funds stick with employer if employee leaves company
- Reimburses health insurance premiums and medical expenses
- Money is reimbursed for expenses/premiums after they are incurred and receipts are provided
- Employees should have health insurance (minimum essential coverage) to participate
- Tax benefits: Tax free for employee and employer
HRA: what it method for the employee
If you’re an employee as well as your boss is providing an HRA, this means that they're likely to reimburse you for medical health insurance costs and perhaps medical expenses with respect to the type of HRA they've chosen. This is very good news because it means you can look for the very best plan that matches your requirements (you know you need to keep your doctor in network!), and you submit receipts and get reimbursed. It is really an alternative to a group plan and means personalized plan choice and portability for you.
Pro tip: Before you sign the contract for a new health plan, make sure you study up on HRA compliant plans.
HRA: what it method for the employer
An HRA enables you to set aside a fixed amount of money each month that employees can use to purchase individual medical health insurance or use on medical expenses, tax-free. What this means is employers reach offer benefits in a tax-efficient manner without the hassle or headache of administering a conventional group plan and employees can choose the plan they need.
The mechanics of the HRA are really quite simple. You select a regular monthly budget that works for you, your employee subscribes for any health plan that works on their behalf, then you definitely outsource the rest for an HRA administrator (like Take Command!) so you don’t have to worry about such things as compliance or forms during tax time.
HRA and Take Command- a perfect match
We believe that HRAs empower employees to be their very own advocate when it comes to their healthcare spend. That’s an important piece of the puzzle once we try to fix the high costs of healthcare.
If you think an HRA might work for your company, don’t hesitate to achieve to our HRA experts. We're around to talk on our website and would be happy to assist you to.
Keely S.
A wife to 1 and mother to four, Keely does everything. She's also dabbled in personal finance blogging and social media management, contributed to MetroFamily magazine, and it is enthusiastic about good food, treasure hunting and upcycling. Having a B.S. in Psychology from the University of Oklahoma along with a knack for a witty punchline, it's no wonder that Keely's social posts are as clever because they get. In her own (very little) spare time, you'll find Keely with her nose in a book or testing out a nearby restaurant with her family.
