What Is an HRA Checking Account?

An HRA (Health Reimbursement Arrangement) is an IRS program that allows employers to make tax-free contributions to accounts used to reimburse employees' health expenses. An HRA is not a checking account, but reimbursements may be distributed on a credit or debit card.

Setting up an HRA

• The best way to set up an HRA is to contact your employer and see if they offer one. Per IRS Publication 969, an HRA can only be funded by an employer and must be a benefit offered in addition to a salary. Employers can offer an HRA in addition to other health plans.

Benefits of an HRA

• An HRA's primary benefit is tax-free reimbursement of medical expenses. Employer contributions to your HRA are not counted as gross income and remain tax free when you use the account to pay for qualified medical expenses. Unused amounts from your HRA can be carried forward for later reimbursements. Reimbursements can also be made to employee spouses and dependents.

Alternative to an HRA

• You can receive similar benefits through an HSA (Health Savings Account). An HSA can be set up by anyone through a qualified trustee such as a bank, credit union or insurance company. The account owner and the account owner's employer can make tax deductible contributions to the account.