Health reimbursement arrangements (HRAs) are excellent benefits that can help you save on your medical expenses throughout the year, especially if yours is set up to reimburse both health insurance premiums and qualifying out-of-pocket expenses.
One of the most common questions employees have about their HRA is: What happens to my unused HRA funds at the end of the year? Is it a “use it or lose it” situation, or do HRA funds roll over year-to-year?
We’ll answer this question and more FAQs surrounding HRA deadlines, how to make the most of your funds, and more end-of-year tips in this article.
What is an HRA?
An HRA is an IRS-approved, employer-funded, tax-advantaged health benefit used to reimburse employees for out-of-pocket medical expenses and, in some cases, health insurance premiums.
An HRA isn’t a health insurance policy. Instead, your employer offers you a monthly allowance of tax-free money dedicated to health spending. You buy medical services, and sometimes an individual health plan, and your employer schedules HRA reimbursement up to a set allowance amount. Just keep in mind that certain HRAs have annual contribution limits.
No HRA funds are allocated until reimbursements are requested. With an HRA, employers reimburse you directly after you incur an eligible expense. The money you receive is free of income taxes if you have health insurance coverage that meets minimum essential coverage (MEC).
Lastly, unlike a health savings account (HSA), any unused funds at the end of the year stay with your employer. Due to their flexibility and convenience, HRAs are a valuable health benefit to help you pay for the medical expenses and out-of-pocket costs that meet your needs.
Does an HRA carry over year-to-year?
Whether or not your HRA funds will roll over into the new year depends on how your employer sets up your HRA. Some HRAs do allow for annual rollover. However, most employers choose to reset allowances at the end of the calendar year and start things over in the new year. Yearly rollover is not available if your employer offers an HRA through PeopleKeep.
While it’s likely your HRA only allows for month-to-month rollover, be sure to reach out to your employer’s HRA plan administrator to check.
What is the deadline to submit HRA claims?
If your HRA doesn’t allow for annual rollover, you’ll need to submit your medical expenses for reimbursement before the end of the plan year.
Generally speaking, eligible employees can submit expenses for reimbursement anytime during the benefit year. For example, if the benefit year begins in January and ends in December, employees can submit expenses through the end of December.
However, depending on the plan documents or explanation of benefits, your employer may allow a grace period, also known as a runout period, for reimbursements.
For example, your employer might extend their health reimbursement deadline by 90 days past the benefit year—giving you a 90-day runout period in which you can still submit eligible expenses incurred within the plan year.
Again, don’t forget to check with your HRA administrator to get the details of your specific HRA coverage plan, including any annual limits.
What can I spend my HRA money on?
If your employer offers an HRA and you have some unused HRA allowance left at the tail end of your plan year, you will likely receive notifications from your plan administrator or within your HRA account dashboard.
Whether your HRA is administered through PeopleKeep or another provider, there are plenty of ways to make the most of it before the new year rolls around and your allowance resets! Below are a few ways to make the most of your funds before the coverage period ends.
Over-the-counter medications and prescriptions
While you may not feel under the weather right now, stocking up on the things you need when you get sick is the perfect way to use up any extra HRA funds you have before they expire.
A few over-the-counter medicines 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
Some out-of-pocket expenses require the minimum amount of documentation to be reimbursed, such as a debit card or credit card receipt, or an invoice.
Your proof must include the following:
- The name of the item or medical service
- The name of the vendor
- The date of purchase
Items in this category include any medical costs you must pay before you meet your deductible, out-out-pocket maximum, or copays. A few examples are doctor visits for a physical exam, prescription drugs, birth control pills, diagnostic services, mental health counseling, physical therapy, and chiropractic care.
Glasses, contacts, or prescription sunglasses
Certain vision expenses are also eligible. If you, your spouse, or any dependents wear prescription or reading glasses, you can buy yourself or them a new pair and get reimbursed with your HRA. Contacts and contact solutions are also HRA-eligible vision expenses.
You may even consider getting blue light filtering lenses to help reduce headaches when using screens or a pair of prescription sunglasses just for fun!
First aid supplies
When was the last time you looked through your first aid kit? The end of the year is the perfect time to use your HRA’s extra money to give it a refresh and make sure you’ve got what you need in case of an emergency.
Some items that are perfect for a first aid kit that are also HRA-eligible include:
- Dental and oral pain products
- Diaper rash creams
- Ear drops
- Motion sickness medication
- Nasal sprays and strips
- Wound care products
Don’t want to put together your own first aid kit? No worries—if you buy one that’s already put together for you, that’s an HRA-qualified expense too!
You may not realize it, but many skincare products are also considered eligible expenses. Any creams or makeup products that you use that have 15+ SPF protection can be reimbursed. What’s more, many acne treatments and related medical care can be covered by your HRA too.
If you’re unsure what kind of skincare products you need, make an appointment with a dermatologist—the office visit is also reimbursable, as well as any medical care or products they recommend.
Sometimes you’ll need a note from your dermatologist or another doctor to get the products reimbursed, but as long as you have the necessary documentation, you’ll be good to go!
Having a unique and personalized benefit like an HRA is a huge boon to individuals and families looking to pay for their health insurance coverage, healthcare products, diagnostic services, and other medical 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 December 21, 2022.