Last week's post provided an overview of Health Savings Accounts or HSAs. This week's post is meant to provide an in depth understanding of the HSA's 1st cousin - the Health Reimbursement Arrangement or HRA.
In June of 2002 the IRS issued an important revenue ruling which created the HRA (through a tweaking of existing IRC section 105). The ruling created tremendous flexibility for the use of employer funded dollars set aside to pay for specific health care items. As this week's blog title suggests, HRAs are similar to HSA's, but are actually much more similar to Flexible Spending Accounts (FSAs). However, HRAs have distinct advantages for both employer and employee, over FSAs and HSAs.
So exactly what is an HRA?
HRAs are defined as accounts that:
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