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Health Reimbursement Account (HRA)

Also known as a Health Reimbursement Arrangement or Health Reimbursement Plan, HRAs are a type of employer-funded health benefit that reimburses employees for out-of-pocket medical expenses.

An employer’s contributions towards HRAs 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.

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

Note: Gusto does not manage HRAs.