0:00

HR Party of One is brought to you by BerniePortal.

0:03

In this episode, we’ll discuss: What an HRA Is

0:07

The Essential Benefits of HRAs The Different Types of HRAs

0:12

Eligibility and Enrollment Requirements for HRAs

0:15

and; Key Features of HRAs Let’s get started!

What Is an HRA?

0:20

-What Is an HRA? A Health Reimbursement Arrangement,

0:24

or HRA, is an employer-funded account that reimburses employees for qualified

0:29

medical expenses. Employees typically pay for medical services up-front and then

0:35

submit proof of payment to their employer, who reimburses them with tax-free funds.

0:39

Many employers are moving toward offering high-deductible health

0:43

plans (HDHPs) to lower the cost of their healthcare offerings. However,

0:47

these plans can lead to higher out-of-pocket expenses for employees, which can create

0:52

dissatisfaction or financial stress. By offering an HRA alongside an HDHP, employers can continue

1:00

to remain competitive in the talent hunt by helping employees manage healthcare costs.

1:05

The employer sets the terms regarding what expenses the HRA can cover. For example,

1:11

employers can choose to cover a wide range of services such as employee insurance premiums,

1:17

doctor’s visits, prescriptions, medical devices, and dental work.

1:23

These coverages help employees offset the out-of-pocket costs

1:27

that coincide with high-deductible health plans.

1:31

Now that we've explored how HRAs work and how they can complement high-deductible health plans,

1:36

let’s take a closer look at the key benefits they offer to both employers and employees.

Essential Benefits of HRAs

1:42

Essential Benefits of HRAs. HRAs offer several key benefits

1:48

that both employers and employees can take advantage of. For employers,

1:53

contributions to HRAs are tax-deductible as a business expense, while employees benefit from

1:59

tax-free reimbursements for medical expenses. This means that neither employers nor employees incur

2:06

any tax liability on the funds in the account. HRAs also provide significant flexibility for

2:14

employers, who can set contribution amounts, determine which medical expenses are covered,

2:19

and adjust the plan to meet the specific needs of their workforce.

2:23

Additionally, unlike HSAs and FSAs, which require employees to contribute part of their paycheck,

2:30

HRAs are fully funded by the employer, meaning employees don’t need to spend their own money

2:36

to benefit from the plan. To gain a clearer understanding of the differences between HRAs,

2:42

HSAs, and FSAs, be sure to explore the resources linked in the description below.

Types of HRAs

2:48

Now that we’ve unpacked the key features of HRAs,

2:51

let’s dive into the different types available. There’s no one-size-fits-all solution,

2:56

and depending on your company size and employee insurance elections, the right HRA can vary.

3:02

Types of HRAs

3:04

There are several types of HRAs available, each with its own set of features and eligibility

3:09

requirements. Let’s take a closer look at the three most common options:

3:14

Integrated HRA: An integrated HRA is linked

3:18

to an employer’s health insurance plan. Employees need to be enrolled in the employer’s group health

3:23

insurance to use this type of HRA. It’s often used to help cover out-of-pocket costs that

3:30

come with a traditional health insurance plan, like deductibles and copayments.

3:34

Individual Coverage HRA (ICHRA):

3:38

The ICHRA is a more flexible option. Employees can use an Individual Coverage HRA with health

3:45

plans purchased through the Marketplace or other qualified health plans. With an ICHRA,

3:50

employees can use the funds to pay for individual health insurance premiums. This

3:55

type of HRA is ideal for businesses that want to offer employees more options for

4:00

health insurance without having to deal with the complexities of traditional group plans.

4:05

Qualified Small Employer HRA (QSEHRA):

4:08

For small businesses with fewer than 50 employees, the QSEHRA is a great

4:13

option. QSEHRAs allow small employers to offer health benefits without acquiring unexpected

4:19

healthcare costs. The contribution limit for QSEHRAs is monitored by the IRS annually.

4:27

For 2025, the maximum employer contribution for self-only coverage is $6,350, and for

4:35

family coverage, it’s $12,800. For information on QSEHRAs,

4:40

check out the respective blog linked in the description.

4:43

Now that we’ve explored the different types of HRAs, let’s turn our attention

4:47

to who can actually take advantage of these benefits. Understanding eligibility and

4:52

enrollment requirements is key to making sure your employees get the most out of their HRA options.

HRA Eligibility and Enrollment

4:59

HRA Eligibility and Enrollment To qualify for an HRA, employees

5:04

typically need to have health insurance that aligns with their employer's plan. For instance,

5:10

with an integrated HRA, employees must be enrolled in their employer's group health

5:15

insurance plan. In contrast, an Individual Coverage HRA (ICHRA) offers more flexibility,

5:22

allowing employees to use individual health plans purchased through the marketplace or other

5:27

qualifying health plans. As for eligibility, HRAs are generally available to full-time employees,

5:34

although some employers may choose to extend coverage to part-time workers or contractors.

Using a TPA or Third-Party Administrator

5:40

Third-party administrators, or TPAs, handle HRA administration for you, so you don't have to

5:47

stress about the additional work load. Our sister company, Alpine, makes benefits management easy by

5:53

offering comprehensive solutions for FSAs, HSAs, HRAs, commuter benefits, and COBRA—all in one

6:01

place. With Alpine, our clients save time, reduce administrative burden, and ensure compliance,

6:08

so they can focus on what matters most—the success of their organization and people.

6:14

It's important to remember that benefits enrollment and eligibility questions from

6:19

your employees can be handled by your broker! Your broker is there to help and can handle

6:24

those questions so that you don't have to. And, if you keep all benefits information stored in a

6:30

benadmin feature, like BerniePortal's, employees can get the answers they need at any time.

6:36

It's easy to get bogged down by employee questions, but it's even easier to redirect

6:41

them to the proper source, whether that be your broker or information accessible to them in your

6:47

HRIS. It's important to reduce the time you spend on EFATs (employee facing administrative

6:53

tasks) so you can focus on more important initiatives, move up the HR hierarchy of needs,

6:59

and grow your career in the process. The first step to doing this well is to use our Rhythms of

7:06

HR tool, which you can download on our website. I’ll put a link in the description so you can

7:11

download this resource. We also have more in depth videos on EFATs and the HR Hierarchy

7:18

of Needs linked in the description for you. Now, let’s get into the key features of HRAs.

Key Features of HRAs

7:25

Key Features of HRAs When it comes to maximizing

7:26

the value of your HRAs, understanding the key features—like contribution limits, rollover

7:32

options, and more—can make all the difference. With Alpine handling the administrative side,

7:39

you can focus on these important details that really set HRAs apart and create lasting benefits

7:45

for both your employees and your organization. Contribution limits, rollover capability,

7:52

and portability are what really set HRAs apart, so let’s break down those features.

7:58

Contribution Limits: HRAs come with different

8:01

contribution limits depending on the type of plan. For standard HRAs and ICHRAs, there are generally

8:08

no annual contribution limits, meaning employers can contribute as much as they want. On the other

8:15

hand, QSEHRAs have annual contribution limits set by the IRS. Under the Affordable Care Act, the IRS

8:22

set contribution limits for QSEHRAs to ensure that small businesses do not inadvertently offer a plan

8:29

that could be considered a substitute for group health insurance. The idea is to encourage small

8:35

businesses to provide a meaningful benefit to their employees without distorting

8:40

the health insurance marketplace or avoiding regulatory requirements for larger businesses.

8:46

Rollover Capability: One of the best features

8:50

of an HRA is the rollover option. If you don’t use all of the monthly contribution,

8:55

the leftover funds often roll over to the next month. In some cases, unused funds can

9:01

even roll over from year to year. However, keep in mind that some HRAs may require employees to

9:08

use the funds by the end of the calendar year, so be sure to check the details of your plan.

9:13

Portability: HRAs are not portable. This

9:16

means that if you leave your job, you generally lose access to any remaining funds in your HRA.

Final Thoughts

9:23

Well, there you have it! We've simplified everything you need to know about HRAs and

9:28

their potential to drive real value for your company. While they may seem ‘too good to be

9:33

true,’ HRAs are a smart, tax-free way to help cover medical expenses,

9:38

giving both employers and employees a win-win solution.

9:42

If you’re still curious about HRAs or have questions like 'Can an employee have both

9:47

an HSA and an HRA?', be sure to check out the resources linked below. We have plenty

9:53

of resources to help you dive deeper into these benefits and make informed decisions.

9:58

At the end of the day, offering HRAs is a strategic move that can improve employee

10:03

satisfaction, reduce company costs, and enhance your company’s benefits package. Remember—your

10:10

role is as strategic as you make it!