Health Reimbursement Medical Plans offer businesses an IRS-approved way to reimburse employees, their spouses, and dependents tax-free for eligible medical expenses, including personal insurance premiums. The most well-known type of Health Reimbursement Medical Plans are Health Reimbursement Arrangements or HRAs. Because the reimbursement occurs pre-tax via payroll, employees and employers often save up to 50% in combined taxes on the cost of medical expenses.
Health Reimbursement Medical Plans - Overview
Health Reimbursement Medical Plans can give employers greater control over monthly health benefits costs, and give employees more choice in their health care coverage. With a Health Reimbursement Medical Plan, the employer sets their own parameters, including:
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What categories of medical expenses are covered
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Maximum contribution per employee class
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What happens to unused funds at the end of the plan year
Health Reimbursement Medical Plans must be funded solely by the employer, and cannot be funded by the employee through salary deductions. Health Reimbursement Medical Plans are not subject to the same plan design requirements that apply to Flexible Spending Accounts and Section 125 cafeteria plans.
Health Reimbursement Medical Plans by Other Names
The term "Health Reimbursement Medical Plan" is often used to mean the same thing as other terms, including:
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Health Reimbursement Arrangement (HRA)
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Health Reimbursement Plan (HRP)
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Medical Expense Reimbursement Plan (MERP)
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Medical Reimbursement Plan (MRP)
Health Reimbursement Arrangement or Section 105 Plans are the most common term.
