An HRA is a workplace-based form of insurance that the employer pays for. Unlike the HSA, where you contribute to the fund, the HRA is fully funded by your employer. You cannot contribute added dollars to an HRA. Employees that take part in these types of plans are reimbursed tax-free when they incur expenses for medical, dental or vision. The employer decides which healthcare costs qualify for reimbursement and decides the rules associated with the program. Because of the tax advantage associated with an HRA, the money that you are reimbursed for expenses is not considered taxable income, so it is a great way to help offset healthcare costs that would otherwise be paid for directly from your wallet.
Although some companies allow you to rollover unused funds to the following year, this varies by employer. Some plans have a use it or lose it policy, and any unused funds at the end of a calendar year are lost. Like an HSA, an HRA often provides you with a debit card to pay for expenses.
