Benefits, Steps, and Tips In Order To Establish A Health Reimbursement Arrangement

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in order to establish a health reimbursement arrangement

Looking to establish a health reimbursement arrangement? Well, you’ve come to the right place! In this article, I’ll walk you through everything you need to know about setting up a health reimbursement arrangement (HRA) and why it can be a game-changer for both employers and employees.

In Order To Establish A Health Reimbursement Arrangement

A health reimbursement arrangement (HRA) is a type of employer-funded benefit plan that helps employees pay for qualified medical expenses. It is established in order to provide a tax-advantaged way for employers to contribute funds that employees can use for their healthcare needs.


There are several benefits to establishing a health reimbursement arrangement:

  • Tax advantages: Contributions made by employers to an HRA are tax-deductible, and the reimbursements made to employees are generally tax-free.
  • Cost savings: HRAs can be more affordable for employers compared to traditional health insurance plans. Employers can choose how much they contribute to the HRA, giving them greater control over their healthcare expenses.
  • Flexibility: HRAs offer more flexibility for employees in terms of healthcare choices. They can use the funds to pay for a wide range of medical expenses, including premiums for individual health insurance plans.
  • Retention and recruitment: Offering an HRA can be an attractive benefit for employees, especially in competitive job markets. It can help employers attract and retain talented employees by providing them with a valuable healthcare option.
  • Compliance: Establishing an HRA can help employers comply with certain healthcare laws and regulations, such as the Affordable Care Act (ACA). By offering an HRA, employers can meet the requirement of providing affordable coverage to their employees.

Overall, a health reimbursement arrangement can be a beneficial solution for employers and employees who are looking for more flexibility and cost control in managing their healthcare expenses. By setting up an HRA, employers can provide a valuable benefit to their employees while also enjoying tax advantages and cost savings.

How to Establish a Health Reimbursement Arrangement

In order to establish a health reimbursement arrangement (HRA), there are several key steps to follow. As an employer, it’s important to carefully navigate through each of these steps to ensure a successful implementation of the HRA. Here’s a breakdown of the process:

Select a Health Plan

The next step is to select a health plan that will work in conjunction with the HRA. This includes choosing a qualified high-deductible health plan (HDHP) that aligns with the requirements for HRA participation.

When selecting the health plan, it’s important to consider factors such as:

  • Premium costs
  • Coverage options
  • Network of healthcare providers

By choosing the right health plan, employers can provide employees with access to comprehensive healthcare coverage while maximizing the benefits of the HRA.

Set Contribution Amount

Once the health plan is selected, employers must determine the contribution amount for the HRA. This involves deciding how much funds will be allocated to each participating employee.

Key considerations for setting the contribution amount include:

  • Budget constraints
  • Benefit goals
  • Expectations for employee healthcare expenses

Employers may choose to contribute a fixed amount or base it on a percentage of the HDHP deductible. The contribution amount should be clearly communicated to employees to ensure transparency.

Document the Plan

To establish the HRA, it’s important to document the plan’s terms and conditions. This includes creating a written plan document that outlines the details of the HRA, such as:

  • Eligibility requirements
  • Covered expenses
  • Reimbursement procedures
  • Plan administration responsibilities

By documenting the plan, employers can ensure compliance with legal requirements and provide clarity to employees regarding their benefits and responsibilities.


Establishing a health reimbursement arrangement (HRA) can bring numerous benefits for both employers and employees. By offering an employer-funded benefit plan, employers can help their employees pay for qualified medical expenses while enjoying various advantages.

Flexibility is another advantage of establishing an HRA. Employers have the freedom to design the plan according to their specific needs, including choosing the health plan and determining the contribution amount. This allows for a tailored approach that suits the unique requirements of the organization and its workforce.

Furthermore, an HRA can aid in employee retention and recruitment. By offering a comprehensive healthcare solution, employers can attract top talent and retain valuable employees. The flexibility and cost savings provided by an HRA can be a significant selling point for job seekers.

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My name is Catherine. I'm a Mom and one of the avid writers working on HerScoop!