What Is a Health Reimbursement Arrangement (HRA)?

An HRA offers people tax advantages that allow employers and workers to save money on the cost of medical care. HRA plans are funded by an employer. To fund the plan, an employer earmarks a certain amount of money, in pre-tax dollars, for workers to use to pay for medical care. HRA plans require that they be funded only by the employer (and not by cutting workers’ salaries). Similarly, the plan’s funds may only be used for proven medical expenses. Many companies find such plans to be very attractive benefits to offer their employees. HRAs are also considered attractive offerings for retirees.

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