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10 health reimbursement arrangement FAQs

ICHRA • January 18, 2023 at 8:09 AM • Written by: Elizabeth Walker

Gaining in popularity as a type of consumer-driven health plans (CDHPs), health reimbursement arrangements (HRAs) allow employees to take better charge of their healthcare and budget for themselves and their families.

HRAs have similar regulations as other tax-advantaged health benefits, like health savings accounts (HSAs) and flexible spending accounts (FSAs). But if this perk is new to your benefits package, you may have questions about whether any special rules apply to HRAs.

To help you understand how your HRA works, we've answered the ten most frequently asked questions about HRAs to help you understand this health benefit.

Learn more about health reimbursement arrangements in our complete guide

What is an HRA?

A health reimbursement arrangement (HRA) is an IRS-approved, tax-advantaged health benefit that reimburses employees for qualified out-of-pocket medical expenses and, depending on which HRA you have, individual health insurance premiums.

While they’re sometimes called a health reimbursement account, an HRA isn’t an account-based health plan. With an HRA, employers provide eligible employees a monthly allowance of tax-free money to spend on medical care.

Once employees purchase an individual health insurance policy or medical services and items, the employer schedules reimbursement up to their available allowance.

The three types of HRAs that PeopleKeep offers are:

  • Qualified small employer HRA (QSEHRA): This HRA is for small employers with fewer than 50 full-time equivalent employees (FTEs) that don’t offer traditional group health insurance. All W-2 full-time employees are automatically eligible for a QSEHRA, and they have annual maximum contribution limits set by the IRS.
  • Individual coverage HRA (ICHRA): The ICHRA is for employers of any size, and only employees with an individual health insurance policy can participate.  They have no maximum contribution limits, and employers can set different allowance amounts for 11 classes of employees
  • Integrated HRA: Also known as a group coverage HRA (GCHRA), an integrated HRA is available to employers of all sizes that offer traditional group health insurance. Only employees on their employer’s group health plan can use the HRA. Like ICHRAs, they have no maximum contribution limits and have seven employee classifications


1. Do I have to have a health insurance policy to participate in my HRA?

You may need a qualifying health insurance policy to receive tax-free reimbursements from your employer. Depending on the type of HRA your employer is offering, you may be required to have an individual health insurance policy—whether that be self-only or family coverage through the individual market—or participate in your employer’s group plan.

For example, if you have an ICHRA, you can’t use it without an individual health insurance plan. This allows you to choose the healthcare coverage that’s best for you during the annual open enrollment period (or during a special enrollment period if you experience a qualifying life event).

Integrated HRAs require you to participate in your employer’s group health plan to take advantage of the benefit.

Other HRAs, like the one-person stand-alone HRA, the retiree HRA, and the excepted benefit HRA (EBHRA), don’t require you to have a qualified medical plan to participate.

2. Who owns my HRA?

By law, HRAs are employer-owned. This is unlike HSAs, which the individual employee owns. HSAs also aren't tied to employment, whereas HRAs are.

Because they’re employer-owned and aren’t set up like accounts, you can’t withdraw the funds from your HRA’s allowance to directly pay for qualified expenses or health coverage. You must incur the expense first and have your employer verify and approve it before they reimburse you.

3. Who can contribute to my HRA?

According to IRS regulations, only the employer can fund HRAs. Participants in the HRA aren’t allowed to contribute—a distinction that often gets confused with HSAs and FSAs, which are accounts that allow for both employee and employer contributions.

As an additional rule, any funds your employer contributes to your HRA don’t count toward your gross income. Reimbursements are income tax-free as long as you have an individual health plan that provides minimum essential coverage (MEC).

4. How much can be contributed to my HRA?

Typically, the amount of money that can be contributed to your HRA is determined by your employer. However, some HRAs, like the QSEHRA and the excepted benefit HRA (EBHRA), have annual contribution limits. Limits should be outlined in your HRA notice.

In 2024, small businesses can offer up to $6,150 for self-only employees ($512.50 per month) and $12,450 for employees with a family ($1,037.50 per month). If you have an EBHRA, the 2024 annual contribution limit is $2,100.

The ICHRA and the GCHRA don’t have any maximum contribution limits, so your employer can offer as little or as much allowance as they wish.

5. Does the money in my HRA earn interest?

Your HRA doesn't earn interest like a regular bank account or an HSA. Remember, HRAs aren’t pre-funded accounts. They’re maintained on an unfunded basis, and money is only paid out as reimbursements from your employer once you make an eligible purchase that is verified and approved. Therefore, they’re unable to earn interest.

6. Does my HRA roll over from year to year?

If you want to roll over your HRA funds annually, it’ll depend on the type of HRA you have and how your employer has the benefit set up.

For instance, QSEHRA allowance amounts can roll over monthly or yearly. But because QSEHRAs have annual contribution limits, your total allowance amount plus your rolled-over amount from the previous year can’t exceed the maximum limit.

However, one-person HRAs, standalone HRAs, or integrated HRAs, can roll over monthly and annually—if the employer chooses to allow them.

Sometimes, rollover capabilities depend on the HRA software your employer uses to administer your benefit. For example, only monthly rollovers are permitted if you have HRA through PeopleKeep.

7. What are considered eligible expenses under my HRA?

Under IRS regulations, HRA funds can only reimburse an employee for eligible healthcare expenses defined in IRS Publication 502. Medical expenses can only be incurred by you, your spouse, and eligible dependents and must be purchased within the HRA’s plan year.

A few eligible medical expenses from IRS Publication 502 are:

  • Individual health insurance premiums
  • Deductibles, coinsurance, and copayments
  • Vision and dental expenses
  • Over-the-counter medicines, like pain relievers or acne treatment
  • Prescription drugs
  • Diagnostic services

The types of HRA you have can sometimes restrict what expenses are eligible for reimbursement. For example, integrated HRAs can't reimburse health insurance premiums. Additionally, your employer can restrict what expenses they want to allow for reimbursement, even if the IRS lists the items as eligible.

Examples of non-eligible expenses include:

  • Items that aren’t defined as eligible under your employer’s HRA plan documents or explanation of benefits
  • Items that aren’t listed in IRS Publication 502
  • Items incurred by you, your spouse, or eligible dependents before your HRA’s coverage effective date
  • Items that can be reimbursed through any other source, such as an HSA or FSA

8. Can I use the money in my HRA to pay for my family's medical expenses?

Yes, your HRA funds can pay for eligible medical expenses of your spouse and any family member listed as dependent on your federal tax return. Per the IRS, as long as you and your spouse or partner are legally married and your HRA covers your dependents, you can have their expenses reimbursed just like you would your own expenses.

If you have a QSEHRA and your employer has enabled the employer-sponsored premium reimbursement (ESPR) feature, you have an added bonus. ESPR allows you to be reimbursed for your spouse's health plan coverage premiums.

However, these reimbursements are taxable because your spouse is most likely paying the monthly premium for the policy through payroll deductions on a pre-tax basis.

9. What is the maximum reimbursement under my HRA?

Employees can be reimbursed up to their total available allowance amount set by their employer. Your employer should outline your allowance amount in your HRA’s plan documents. Additionally, your maximum reimbursement amount may increase or decrease from year to year.

Employers aren’t obligated to provide you with the maximum available allowance amount (if you have an HRA with an allowance cap) or even the same amount you had the previous year if you have an HRA with unlimited allowance capabilities.

10. What happens to the money in my HRA if I leave my job or retire?

Because your HRA is employer-owned, HRAs are only for current employees. Unused funds stay with your employer if you leave your job, are laid off, or retire. This is unlike HSAs that are employee-owned. With an HSA, the account and funds go with you even if you change jobs.

You also can’t “cash out” any remaining allowance funds before you leave your job since an HRA isn’t pre-funded, and the funds aren’t yours until you make an eligible expense.

However, your employer may allow a 90-day grace period for you to submit reimbursement requests for any expenses you made while you were still employed. Additionally, retiree HRAs allow you to use contributed funds after termination.


If your employer offers you an HRA, you’re in luck! With your HRA funds, you have access to hundreds of reimbursable out-of-pocket costs for you and your family, keeping you financially steady throughout rising healthcare costs. The better you understand how your HRA works, the greater value you can receive from it and begin focusing on your well-being.

This article was originally published on July 16, 2012. It was last updated on December 12, 2023.

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Elizabeth Walker

Elizabeth Walker is a content marketing specialist at PeopleKeep. She has worked for the company since April 2021. Elizabeth has been a writer for more than 20 years and has written several poems and short stories, in addition to publishing two children’s books in 2019 and 2021. Her background as a musician and love of the arts continues to inspire her writing and strengthens her ability to be creative.