Health Reimbursement Account (HRA)

A Health Reimbursement Arrangement (also known as an HRA or Health Reimbursement Plan) is an employer-funded health benefit that reimburses employees for out-of-pocket medical expenses.

Gusto doesn't offer an HRA, but if you offer one through a third party, you can set up tax-free payroll reimbursements for enrolled employees. 

Tax implications

• Employer HRA contributions are tax-free, as long as they’re set up and managed in accordance with IRS requirements and only used to fund eligible medical expenses.
• Because HRAs are 100% employer-funded, no deductions are taken from payroll. As a result, there are no payroll tax implications for employees—these reimbursements don't need to be taxed or reported on their tax forms. (QSEHRA contributions, however, must be reported on employee tax forms. Learn more here.)

Small businesses may provide these types of reimbursement arrangements without violating ACA mandates, but situations vary and you should consult a licensed professional or tax consultant before taking this route.