A health reimbursement arrangement (HRA) is a tax-free account that puts you in control of your family’s healthcare expenses. It’s easy to use, funded through your employer, and a smart way to save up for out-of-pocket medical, dental, and vision bills, including retiree insurance premiums.
HRAs have several advantages compared to health savings accounts (HSAs) and flexible spending accounts (FSAs).
- No IRS contribution limits
- Unused funds roll over from year to year
- No high-deductible health plan (HDHP) required
- Reimburses medical premiums before and after age 65, including Medicare and Medicare supplement premiums
To learn more about the Gallagher HealthInvest HRA Plan, keep reading, or watch our Welcome! HRA Overview video.
How It Helps
You might be struggling to cope with the cost of doctor visits, prescriptions, new glasses or contacts, and braces for the kids. Maybe you’re working longer than you had expected because you can’t afford medical insurance—up to $1,000 or more per month for a retiree and spouse before age 65! Fortunately, the Gallagher HealthInvest HRA Plan can help.
Many participants save their HRA money until retirement to reimburse retiree insurance premiums and the cost of medical items and services they wouldn’t be able to afford otherwise. This includes things like power chairs, hearing aids, expensive vision and dental care, and emergency medical bills.
How It Works
While HRA plan designs and practices vary from group to group, here’s an outline of how the program typically works.
- Your employer sends tax-free money to your HRA. This money comes from a sick leave cash out, vacation cash out, mandatory employee contribution, or some other source. In many cases, these funds would have otherwise been paid to you as taxable income. Your employer might also contribute funds in place of some other tax-free employee benefit.
- Using the available investment fund lineup, you get to choose how your HRA money is invested. Your account is invested in your plan’s default fund or portfolio until you choose something else.
- Depending on your HRA plan design, you can use your money right away or save it up for later, such as during retirement. The account is yours to keep even after you separate from service or retire, provided you meet your plan’s vesting requirements, if any. Certain HRAs permit claims eligibility only after you separate from service or retire. Other limitations may apply.
- There are no “use-or-lose” rules and no annual carryover limits to worry about.
Plan eligibility and funding are usually subject to collective bargaining or employer policy. IRS rules don’t allow individual elections. Check with your employer if you need to know more about eligibility and how your HRA is funded.
Best Tax Advantage
With an HRA, you get the best possible tax advantage—even better than tax-deferred 457, 403(b), and 401(k) plans with taxable withdrawals.
- No taxes on employer contributions;
- No taxes on investment earnings (if any); and
- No taxes on claim reimbursements (withdrawals).
This is sometimes called “triple” tax savings. By not paying any taxes, you get to keep a lot more for yourself! Most save up to 30% or more, depending on their individual tax situation. Tax savings includes state income tax (if applicable), federal income tax, and FICA taxes (Social Security and Medicare).
If your HRA is claims eligible, the HRA Dashboard included in your welcome packet will list your claims-eligibility date. Depending on your individual situation, your claims-eligibility date may be: (1) your separation or retirement date; (2) the date specified by your employer upon enrollment; or (3) the date upon which your enrollment and contribution from your employer have been received.
Using Your HRA
When claims eligible, you can quickly submit claims and supporting documentation after logging in online or from our mobile app, HRAgo®. You can use your Benefits Card (debit card) to pay for qualified medical items and services directly from your HRA.
If you’re retired, we can automatically reimburse most monthly insurance premiums, including Medicare premiums. To set up an automatic premium reimbursement, log in, click Claims, then click Set Up an Automatic Premium Reimbursement. You can also do this from our mobile app, HRAgo®. If you’d rather use a paper form, download and print our Automatic Premium Reimbursement form, or request one from our Customer Care Center.
Your HRA covers you, your spouse, and dependents. This includes your young-adult children through the end of the calendar year in which they turn age 26.
Generally, dependents must satisfy the IRS definition of “Qualifying Child” or “Qualifying Relative” as of the end of the calendar year in which expenses were incurred. These requirements are defined in Section 105(b) of the Internal Revenue Code. Internal Revenue Code definitions supersede and may differ from state definitions.
Common Medical Expenses
You can use your HRA to pay or reimburse hundreds of eligible medical, dental, and vision expenses and premiums. To be eligible, expenses must qualify under Section 213(d) of Internal Revenue Code. Common examples include doctor visits, prescriptions, dental, vision, orthodontia, chiropractic, retiree medical premiums, Medicare premiums, and hundreds more. Reimbursement of qualified long-term care insurance premiums is subject to annual IRS limits. These limits are indexed to inflation and updated annually.
For more details, log in, click Resources, and look for Medical Care Expenses. Certain limitations may apply.
If you pass away, your HRA can transfer to your surviving spouse and dependents. Federal law prohibits most HRA plans from providing or transferring benefits to non-dependent heirs of deceased participants.
For more information, read our What Happens If I Pass Away? handout.
Summary Plan Description
The Summary Plan Description contains more detailed information about the Gallagher HealthInvest HRA Plan, including how to use your Plan benefits and the rights and responsibilities of those covered by the Plan. In addition, several important notices are included: Privacy Notice, COBRA Notice, USERRA Notice, FMLA Notice, Medicare Part D Notice of Non-Creditable Coverage, Coordination of Benefits with Medicare, Exemption from Annual Limit Restrictions, and Premium Tax Credit Eligibility.
Summary of Benefits and Coverage
Federal regulation requires group health plans to furnish a standardized Summary of Benefits and Coverage (SBC) annually. The purpose of the SBC is to help consumers compare benefits across available insurance plans. While the Gallagher HealthInvest HRA Plan is a group health plan, it is not insurance. Therefore, certain information and defined terms in the SBC do not apply. The Summary Plan Description is your best source for more Plan information.