A health care reimbursement account is another term for a health reimbursement arrangement (HRA) or a Section 105 Medical Reimbursement Plan. With a health care reimbursement account, an employer can offer tax free reimbursement of employees' personal health insurance premiums. Think of it as a business expense account for personal health insurance.
Introduction to Health Care Reimbursement Accounts
A health care reimbursement account is an IRS approved, employer-funded, tax advantaged employer health benefit plan that can reimburse employees for individual health insurance premiums. A health care reimbursement account is not considered health insurance. A health care reimbursement account allows the employer to make contributions to an employee's account and provide reimbursement for eligible expenses. A health care reimbursement account is usually set up to reimburse employees for health insurance premiums, or set up along side a group health insurance plan to pay for medical expenses not covered by insurance
Health Care Reimbursement Accounts are Notional
A health care reimbursement account is simply an agreement between the employer and employees. In other words, they are notional arrangements where no funds are expensed until reimbursements are paid. Through a health care reimbursement account, employers reimburse employees directly only after the employees incur approved health care expenses.
Health Care Reimbursement Accounts have No Annual Limits
Unlike a Health Savings Account (HSA) or a Flexible Spending Accounts (FSA), there is no limit to the amount of money an employer can contribute to an employee’s health care reimbursement account.
Health Care Reimbursement Accounts Allow Annual Rollover
Health care reimbursement account balances may roll forward from year to year. Employers can design the program not to allow balances to rollover from one year to the next. However, limiting the rollover feature defeats a key health care reimbursement account advantage. Employers may allow employees to have access to their health care reimbursement account after retirement. However, employers may not pay or distribute cash or other benefit balances to any employee.
Health Care Reimbursement Account Administration Reporting Features
Defined Contribution Software Administration reporting features make real-time monitoring of health care reimbursement account liabilities, reimbursements and utilization easy. Employers can change plan benefits at any time or cancel the entire plan at any time. Further, health care reimbursement accounts allow employers to establish plan-year maximum reimbursements for any given category of expense (e.g., dental) and to establish a maximum balance that any participant class may hold at a time.
Health Care Reimbursement Account by Another Name
The term "health care reimbursement account" can be used to describe similar health reimbursement accounts such as: