Does a health reimbursement account rollover? Good question. Let Take Command clear that up for you, along with a few of the finer details surrounding health reimbursement arrangements. First important detail to remember: HRA stands for health reimbursement arrangement, not health reimbursement account. Let's jump in!
What is a health reimbursement arrangement?
An HRA is not a bank account. This can be a little confusing at first, but it’s actually much simpler. Unlike Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) that are accounts, “HRA” stands for Health Reimbursement Arrangement.
If you're an employee and your boss is offering you reimbursement health insurance like an HRA, it means that they are going to reimburse you for health insurance costs and possibly medical expenses depending on the type of HRA they have chosen. This is great news because it means you can shop for the best plan that fits your needs (you know you want to keep your doctor in network!), and you submit receipts and get reimbursed. This is an alternative to a group plan and means personalized plan choice and portability for you. It means employers reimbursing employees for health insurance and medical expenses.
A health reimbursement arrangement allows employers to set aside a fixed amount of money each month that employees can use to purchase individual health insurance or use on medical expenses, tax-free. This means employers get to offer benefits in a tax-efficient manner without the hassle or headache of administering a traditional group plan and employees can choose the plan they want.
→ Check out our post on HRA account pros and cons.
→ Learn more about HRA account rules.
Most common HRAs
QSEHRAs, or Qualified Small Employer Health Reimbursement Arrangements, have been around since 2017. They are HRAs designed specifically for small businesses and are limited to businesses with 50 employees or less. QSEHRA contribution limits for 2021 are $5,300 a year for an individual or $10,700 for a family per year.
ICHRA Plans, or Individual Coverage HRAs, represents a “super-charged” version of QSEHRA with no contribution limits and greater design flexibility with their hallmark ICHRA class function that will appeal to more employers. ICHRA expands the benefits of HRAs to a larger pool of companies, one of our favorite things about ICHRA when we look at ICHRA pros and cons.
How does health reimbursement work?
The mechanics of an HRA are surprisingly simple. At a high-level, employees pay for their own health expenses and you reimburse them. Here’s how it works:
- Employers design their plan and set reimbursement allowances
- Employees pay for their own health insurance and medical bills
- Employees provide proof of their expenses
- Employers reimburse the employee up to the set limit (in the case of the QSEHRA)
The key to note is payments are reimbursements. Employees will pay the insurance company or doctor’s office directly and then submit a claim to get reimbursed for their expenses tax-free.
Does a health reimbursement account rollover?
The good news with an HRA is that any unclaimed reimbursement allowance rolls over to the next month and accumulates to build up a balance of unclaimed reimbursements until the end of the calendar year. The balance will start back at zero in January. This also means if you have a month of larger expenses, you can receive a reimbursement larger than your monthly allowance if you have a balance of unclaimed funds saved up.
What happens to unused HRA funds?
Remember, an HRA is a reimbursement tool, not a savings account. The rollover amounts are allowances that can only be claimed for reimbursement, there are no options for a cash payout of unused funds. At the end of a calendar year, any unclaimed allowance will be lost so it is best to save your receipts and enter your expenses as soon as you can!
Need help making sense of how to get the most out of these tax-friendly tools?
Our team of HRA experts is ready to chat with you on our website. Our award winning HRA administrator platform, our QSEHRA Administrator experts and our ICHRA administrator experts are all at the ready to help you choose what's best for you.
This post was originally published in 2021 and has been updated with new information and insights for 2023.
A wife to one and mother to four, Keely does all of the things. She’s also dabbled in personal finance blogging and social media management, contributed to MetroFamily magazine, and is passionate about good food, treasure hunting and upcycling. With a B.S. in Psychology from the University of Oklahoma and a knack for a witty punchline, it’s no surprise that Keely’s social posts are as clever as they get. In her (very little) free time, you’ll find Keely with her nose in a book or trying out a local restaurant with her family.