Is there a limit on HRA contributions?

by Keely S.

Is there a limit on HRA contributions? It depends on which HRA you choose! Health reimbursement arrangements are tax-advantaged benefits solutions built on a series of regulations that help to ensure they are being offered fairly and are achieving their intended aim, which is to help employees pay for benefits tax-free.

Types of HRAs

The two main types of HRAs you’ll hear about are the qualified small employer health reimbursement arrangement (QSEHRA), perfect for businesses with less than 50 employees that do not offer a group plan. Then there’s the individual coverage health reimbursement arrangement (ICHRA), which allows for tax-free reimbursement of benefits for any size business and for any amount.

Reimbursement rate options

In general, employers have a lot of flexibility with how they design and implement an HRA. An overarching rule though is that employees must be treated fairly. That means you can’t offer some employees more money than others unless they can be fairly separated. The IRS calls this “same terms requirements” and provides details in Section C of IRS Notice 2017-67.

With the QSEHRA, employers have a few options on setting reimbursement rates. The key is rates have to be offered fairly to all eligible employees. Here are the most common tried and true methods we see:

  1. Reimburse all the same amount.
  2. Reimburse all the maximum amount.
  3. Reimburse different amounts based on family size.
  4. Reimburse different amounts based on employee age.

The ICHRA allows for even more customization when it comes to reimbursements. Everyone does NOT have to be treated equally across the board. An employer can choose to treat different classes of employees differently based on the 11 ICHRA classes.

What is the limit on HRA contributions?


All QSEHRA reimbursements are subject to annual maximums and become available to employees on a monthly basis. This means employees can’t take the full annual amount in January—instead, the funds become available to employees each month.

In the law, these amounts are tied to inflation, so we expect them to go up a little bit every year.

And in fact, since its inception, we’ve seen a steady increase annually of about $100 for individuals and $150-200 for families.

For 2020, the contribution rates were as follows:

  • Individual $5250 or $437.50/month
  • Family $10,600 or $883.33/month

While the 2021 limits haven't been released yet, if we assume the same annual rate increases, we predict:

  • Individual $5350 or $445/month
  • Family $10,700 or $891.67/month

Two other key points:

  • Unclaimed funds stay with the employer. If an employee is not eligible or does not make a claim in a given plan year, the employer keeps the money.
  • Funded solely by the employer. This makes sense when you think about it because QSEHRA is a reimbursement of expenses the employee is paying out of pocket. This can be a little confusing at first for small business owners that had traditional group health plans in the past and would deduct employee contributions on the employee’s paycheck. Just to be clear though—employees cannot contribute to a QSEHRA (they would just pay out of their own pocket)


As we’ve already seen, while there aren’t any contribution limits with ICHRA, there is the issue of how little you can actually contribute, which changes from year to year. The minimum amount is determined by the issue of ICHRA affordability and how the HRA interacts with premium tax credits. The affordability threshold is the highest percentage of household income an employee can be required to pay out of pocket for monthly health insurance premiums.

The IRS has announced an increase to the affordability threshold to 9.83% of employee pay for 2021. This is a slight increase from the 9.78% allowed for 2020.

Still have questions?

We hope we've answered some of your questions regarding HRA contribution rates. If you're still curious, chat with our team with any questions you may have about these new, tax-friendly benefits or check out our new ICHRA Guide for more information on its background, setup process, requirements, and rules. For an in-depth look at the QSEHRA, check out our guide, or visit our QSEHRA FAQ page!


Picture of Keely S.

Hi, I'm Keely S.! 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.