End-of-year HRA tips: How to use your funds before they expire

What is an HRA?

An HRA is an employer-sponsored health benefit that allows employees to receive tax-free reimbursements for qualified out-of-pocket medical costs. Depending on the HRA, your individual health insurance premiums may also be eligible. IRS Publication 502¹ and the CARES Act² outline the full list of qualified items.

Your employer gives you a monthly allowance amount to spend on medical care. Only employers can contribute to an HRA, so you’re not responsible for maintaining or funding it.

Once you buy an eligible expense, you submit proof of purchase for the service or item. HRA claim documentation usually comes in the form of a receipt, invoice, or explanation of benefits (EOB). Then, your employer reimburses you tax-free up to your monthly allowance amount. Any unused money stays with your employer if you leave the company.

Depending on the type of out-of-pocket expense, you’ll have to submit one of the following types of documentation:

• Proof of an incurred expense
• Proof of an incurred expense and a doctor’s note
• Proof of an incurred expense and a prescription

If you have an HRA instead of a group policy, you have more financial support for your out-of-pocket medical costs and more flexibility and authority over how you leverage your health benefit.

The following are three types of HRAs that your employer can offer with PeopleKeep:

What can I spend my HRA money on?

If you have unused HRA dollars at the end of your plan year, you should take advantage of them before the new year begins and your allowance resets.

Remember that out-of-pocket expenses require documentation, such as a debit or credit card receipt or an invoice.

Your documentation must include the following:

• The name of the item or medical service
• The name of the vendor
• The date of purchase

With more than 200 types of eligible HRA expenses, knowing what to spend your allowance on before time runs out can be overwhelming. To make it easy for you, we’ve listed a few common categories below.

Over-the-counter medicine and prescriptions

While you may not feel sick right now, stocking up on the things you need for when you’re ill is the perfect way to use your extra HRA funds before they expire.

A few over-the-counter items that are HRA-eligible include:

• Aspirin or other pain relievers
• Allergy and sinus medicine and products
• Cold and flu medicines
• Cough drops, cough syrups, and sore throat lozenges
• Asthma medication
• Nasal sprays and strips
• Anti-diarrheal medicine
• Anti-itch products

Items in this category also include any prescription medical costs you’re responsible for paying before you meet your annual deductible or out-of-pocket maximum. These items and services often require you to pay a copay.

A few examples of these items are:

• Prescription drugs
• Birth control pills

Office visits

If you have any end-of-the-year medical appointments, your employer can reimburse you for the cost of office visits.

This includes the following:

• Routine doctor visits for a physical exam
• Diagnostic services
• Mental health counseling
• Physical therapy
• Chiropractic care

Dental and vision expenses

Many individuals put off getting necessary dental or vision care toward the end of the year. If this is you, it’s a perfect time to put your HRA’s tax-free money to use.

Examples of eligible items in this category include:

• Prescription eyeglasses and sunglasses
• Reading glasses
• Contact lenses and contact solution
• Eye exams
• Laser/LASIK eye surgery
• Dental exams
• Fillings, crowns, bridges, and dentures
• Orthodontic treatment
• Dental surgery
• Over-the-counter dental and oral pain products

First aid supplies

The end of the year is the perfect time to use your HRA’s extra money to update your first aid kid and ensure you’ve got what you need in case of an emergency.

Examples of eligible items in this category include:

• Antacids
• Bandages
• Dental and oral pain products
• Diaper rash creams
• Antibiotic ointment
• Ear drops
• Eye drops
• Laxatives
• Motion sickness medication
• Nasal sprays and strips
• Wound care products

Don’t want to put together a first aid kit? No worries! Buying a pre-made kit is also an HRA-qualified expense.

Skincare products

You may not realize it, but many skincare products are also eligible expenses. If you’re unsure what skincare products you need, make an appointment with a dermatologist to confirm.

Examples of eligible items in this category include:

• Sunscreen, sunblock, or similar creams with SPF 15+
• Acne treatments
• Dermatology appointments
• Other products recommended by your dermatologist

Sometimes, your items will need a note from your dermatologist or another doctor to be eligible for reimbursement. But as long as you have the proper documentation, they should be HRA-approved.

Feminine hygiene products

In 2020, the CARES Act expanded the list of eligible HRA expenses to include over-the-counter feminine hygiene products.

Examples of eligible items in this category include:

• Tampons
• Disposable and non-disposable sanitary pads
• Liners
• Menstrual cups
• Sponges
• Disposable and non-disposable underwear for menstruation

These items are a necessity for millions of Americans. So, they’re a great use of your leftover HRA dollars if you need them.

Medical devices

The cost of home medical equipment varies significantly, depending on the type of device, the brand, and the technology needed. For example, the average price of a hands-free crutch is around $150³. But an electric wheelchair can cost anywhere between $1,500 and $5,000⁴.

If you know you’ll need a new medical device soon, your HRA can help you offset the expense.

Examples of eligible items in this category include:

• Artificial limbs
• Blood pressure monitors
• Body scans
• Breast pumps and accessories
• Walking aids, such as canes, walkers, and crutches
• Cholesterol test kits and supplies
• Diabetic monitors and supplies
• Hearing aids and batteries
• Fertility and ovulation monitors
• Oxygen equipment
• Splints, supports, and braces
• Wheelchair

Some devices, such as exercise equipment and humidifiers, are eligible expenses with a doctor's note.

Ancillary coverage

In addition to individual health insurance, you can use your HRA allowance to purchase certain ancillary benefits, like dental and vision plans. Unlike traditional health insurance, you can enroll in ancillary coverage any time of year. In many cases, there’s no waiting period for new ancillary enrollees to begin using their benefits.

If your employer is offering you an HRA through PeopleKeep, you can shop for ancillary coverage directly from your dashboard.

Does an HRA carry over year-to-year?

HRA funds roll over from month to month. But whether or not your HRA funds will carry over into the new year depends on how your employer sets up your HRA and their HRA administrator.

Some HRAs do allow for annual rollover. For example, unused QSEHRA and excepted benefit HRA (EBHRA) allowances can roll over up to their maximum annual contribution limit yearly. However, most employers choose to reset HRA allowances at the end of the calendar year and restart you with a new allowance amount the following year.

If your employer manages their HRA through PeopleKeep, your HRA unused funds won’t roll over annually. However, funds will accumulate by rolling over monthly until the end of the plan year.

While it’s likely that your HRA only allows for monthly rollovers, contact your employer’s HRA administrator to confirm.

What is the deadline for submitting HRA claims?

Generally speaking, eligible employees can submit claim documentation for reimbursement anytime during the benefit year. For example, suppose the benefit year begins in January and ends in December. In that case, employees can submit reimbursable expenses through the end of December.

If your HRA doesn’t allow for annual rollover, you must submit medical claim documentation for reimbursement before the end of your coverage period. If you don’t use your total allowance amount by the end of the year, your unused funds will expire.

However, there’s an exception to these general rules. Depending on your HRA plan design, your employer may allow a grace period—or a runout period—for you to submit reimbursements.

For example, your employer could give you an extra 90 days past the end of a plan year to submit reimbursement requests for any eligible healthcare expenses you incurred during that plan year.

This chart showcases the above example:

Each employer has some amount of flexibility when designing their HRA. So check with them for details on your specific benefit, including reimbursement deadlines or grace periods.

Conclusion

Having a unique and personalized benefit like an HRA is a boon to individuals and families looking to pay for their monthly premiums and other qualified health expenses.

Whether you have significant procedures planned or just need to stock up on a few over-the-counter products, the examples in this article will help you make the most of your HRA’s extra money before the plan year ends.

This article was originally published on December 15, 2021. It was last updated on November 22, 2024.

1. IRS Publication 502

2. IRS CARES Act expansion

3. Care Credit - Crutches

4. WelbeHealth -Wheelchairs