What is an HRA?
An HRA is a tax-free savings arrangement that allows employees to be reimbursed for eligible medical care expenses. HRAs are very often confused with Health Savings Accounts (HSAs) because of their similarities. However, an HRA does not require enrollment in a High Deductible Health Plan. HRA plan designs may vary considerably. HRAs may be linked to a health insurance plan and provide additional coverage or you can have an HRA stand by itself. An HRA may provide reimbursement to active employees, retirees or both. HRA are often times funded through a Voluntary Employee Beneficiary Association (VEBA) as described in Internal Revenue Code 501(c)(9) or an IRC 115 Integral Part Trust. An HRA requires the establishment of a Plan Document. The Plan Document provides the features and the administrative processes by which the HRA will run. An EBC representative can help you build a plan that fits your specific goals.
An HRA is somewhat advantaged over an HSA in that with the help of a consultant you can design a Plan that works for your employees. Employers do not pay FICA on contributions into an HRA making it a great way to fund post-employment health care benefits for your employees.