From Wikipedia entry for HRA: "a type of US employer-funded health benefit plan that reimburses employees for out-of-pocket medical expenses" (bold is mine).

It sounds too good to be true, but does the "employer-funded" part mean that it's effectively free money as compared to opting out of an HRA (assuming I have already decided to enroll in a high-deductible health plan)?

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    Are you sure that your employer is offering an HRA and not an HSA? Those are two different things. – Ben Miller - Remember Monica Dec 7 '17 at 4:47
  • @BenMiller Yes, it is clearly labeled as an HRA on our benefits portal. – Pedro Cattori Dec 7 '17 at 13:57
  • Are you sure you're able to opt into the HDHP but simultaneously reject the HRA? In my experience, accepting one means accepting the other. I can see a lot of reasons to not reject the HRA because otherwise you'll be on the hook for the full deductible and coinsurance once the deductible is met. – Spig Dec 7 '17 at 14:09
  • Yes there is a box in our benefits portal to "Waive HRA". The form start with that box unchecked, but the "accept HRA" option also unchecked. – Pedro Cattori Dec 7 '17 at 17:42

The HRA is a reimbursement arrangement that is entirely funded by your employer. It is essentially free money to you, reimbursing you for medical expenses not covered by your insurance. However, there are a few situations where it might make sense to opt out of this benefit.

If you have an HSA-eligible High Deductible Health Plan (HDHP), you can make tax deductible contributions to your own HSA. However, if you are covered by an HRA, you are ineligible to contribute to an HSA. Therefore, if you want to contribute to an HSA, you would need to opt out of the HRA.

Similarly, your own HRA automatically covers your spouse. So if your spouse wants to contribute to an HSA (or even if your spouse's employer is contributing to her HSA), you would need to opt out of your HRA.

To decide whether an HSA is more advantageous than your employer's HRA, you need to look at how much of a tax deduction you would be getting by contributing to an HSA and compare that to how much your employer is offering in the HRA. Keep in mind, however, a big difference between the two plans: An HRA belongs to your employer and is entirely funded by them. Anything unused goes back to them when you leave. With an HSA, however, the money inside is yours to keep forever until it is spent by you.

One other note: There is something called a limited-purpose HRA, which is an HRA that can only be used for specific types of health expenses, including dental and vision, but cannot be used for general medical expenses. This type of HRA does not make you ineligible for the HSA.


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