QUESTION

My employer is offering to set up a health insurance reimbursement arrangement (HRA) for me to buy insurance on my own. What’s an HRA and how does it work?

Individuals with coverage | Coverage for Employees of a Small Employer
ANSWER

A qualified small employer health reimbursement arrangement (HRA) allows small employers who do not offer health insurance coverage to fund a HRA for their employees on a tax-free basis to reimburse premiums for health insurance that qualifies as minimum essential coverage and certain medical expenses defined by the IRS. (Note: an October 2018 federal proposed rule would extend such HRAs to large employers, as well. It is expected to be finalized some time in 2019). Your small employer funds the HRA without any contributions from the employee and funding payments cannot exceed $5,050 per year for self-coverage ($10,250 for family coverage) in 2018. Your employer is prohibited from getting employee contributions or reducing your salary for the HRA. There are eligibility requirements that small employers can apply for HRA, like being a full-time employee or having worked at least 90 days. (26 U.S.C. § 9831).

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