What an HRA Account Is

An HRA (Health Reimbursement Arrangement) is a tax-advantaged account that your employer funds to reimburse you for out-of-pocket medical expenses. Unlike an HSA or FSA, you do not contribute your own money — your employer decides how much to put in each year, and you spend it on may have access to medical costs. The money is pre-tax, meaning neither you nor your employer pays income tax on it.

The key difference from HSA and FSA accounts is control: your employer owns the HRA and sets the rules. They decide the annual contribution amount, which expenses count as reimbursable, and what happens to unused money at year-end. Some employers let unused funds roll over to the next year; others do not. This makes HRA terms vary significantly from one employer to another.

Key Takeaways

  • Your employer funds the HRA entirely — you contribute nothing, but you can only use it for medical expenses your employer has approved.
  • HRA money is tax-free when used for may have access to medical expenses like copays, deductibles, prescriptions, and dental or vision care.
  • Unused HRA funds may roll over to the next year or be forfeited, depending on your employer's plan design — check your plan documents to know which applies.
  • If you leave your job, you typically lose access to your HRA balance, though some employers allow you to continue reimbursement for expenses incurred before you left.
  • An HRA works alongside your health insurance plan and is often paired with a high-deductible health plan (HDHP) to help cover out-of-pocket costs.

How HRA Reimbursement Works

When you incur a medical expense, you pay for it out of pocket first. Then you submit a claim to your HRA administrator — usually through an online portal, by mail, or by phone — with a receipt or explanation of benefits (EOB) from your provider. The administrator verifies that the expense is on your employer's approved list and reimburses you, typically within one to two weeks.

Some employers issue HRA debit cards that work like FSA cards, letting you pay directly at the point of service without submitting a claim afterward. Others require you to pay and then request reimbursement. Ask your HR department which method your employer uses, because it affects how quickly you can access the money.

You do not have to use all your HRA funds in the year they are contributed. Depending on your plan, unused money may carry over to the next year, sit in a separate reserve account, or be forfeited. This is one of the biggest variables between HRA plans, so read your plan summary or ask HR what happens to leftover funds.

What Expenses an HRA Covers

HRA accounts cover the same broad range of medical expenses as FSA and HSA accounts: copays, coinsurance, deductibles, prescription medications, dental work, vision care, mental health treatment, and medical equipment like crutches or blood pressure monitors. However, your employer can restrict the list further if they choose. Some employers exclude dental or vision, for example, or limit which prescription drugs are covered.

Over-the-counter medications are covered only if you have a prescription from your doctor — you cannot buy pain relievers or cold medicine without a prescription and expect reimbursement. Expenses for cosmetic procedures, gym memberships, or general wellness products do not may have access to.

Your plan documents or benefits summary should list exactly which expenses your employer covers. If you are unsure whether something qualifies, contact your HRA administrator or HR before you spend the money.

HRA Contribution Limits and Employer Funding

Unlike HSAs and FSAs, HRAs have no federal contribution limit set by law. Your employer decides how much to contribute each year — it could be $500, $2,000, $5,000, or any other amount. This is one reason HRA generosity varies so widely between employers. A company with a large budget might fund a robust HRA; a smaller employer might contribute less.

Your employer must inform you of the annual contribution amount before the plan year begins, usually in your benefits enrollment materials. If your employer changes the contribution mid-year, they must notify you. The contribution is made by your employer, not deducted from your paycheck.

Because the employer controls funding, there is no catch-up contribution option like there is with HSAs. You get only what your employer puts in.

What Happens to Your HRA When You Leave Your Job

When you terminate employment, you lose access to your HRA account. Unlike an HSA, which you own and can take with you, the HRA belongs to your employer. Any unused balance typically stays with your employer — you do not get to keep it or roll it into another account.

Some employers allow you to submit reimbursement claims for medical expenses you incurred before your last day of work, even if you submit the claim after you have left. This is called run-out coverage. Ask your HR department or plan administrator whether your employer offers this, and if so, what the deadline is for submitting claims.

If you are leaving a job and have a significant HRA balance, try to use it on planned medical expenses before your departure date. Once you are off the payroll, the money is gone.

HRA vs. HSA vs. FSA: When Each Makes Sense

An HRA is most valuable when your employer funds it generously and you have predictable medical expenses. Because you do not contribute your own money, you benefit immediately without reducing your paycheck. If your employer pairs the HRA with a high-deductible health plan (HDHP), the HRA can cover your deductible and out-of-pocket costs, making the HDHP more affordable.

An HSA is better if you want to own the account and carry the balance forward indefinitely, even after you change jobs. An FSA is better if you want to contribute your own pre-tax money and do not mind the use-it-or-lose-it rule (or your employer's carryover policy). An HRA is best when your employer is willing to fund it and you want simplicity — you do not have to decide how much to contribute or manage the account yourself.

Many employers offer more than one account type. You might have both an HRA and an FSA, for example. Check your plan documents to see what your employer offers and whether you can use them together.

Common Mistakes and How to Avoid Them

The most common mistake is assuming your HRA funds roll over automatically. Some do; many do not. Check your plan documents or ask HR at the start of each year whether unused money carries forward or is forfeited. If it is forfeited, plan your medical spending accordingly so you do not leave money on the table.

Another mistake is not submitting claims promptly. Most HRA plans have a deadline for submitting reimbursement requests — often 60 to 90 days after the end of the plan year. If you wait too long, your claim may be denied. Keep receipts and EOBs organized, and submit claims as soon as you have the documentation.

A third mistake is not reading your plan's list of covered expenses. Just because something is medically necessary does not mean your employer's HRA covers it. Dental and vision are common exclusions. Confirm coverage before you incur the expense.

Frequently Asked Questions

Can I take my HRA balance with me if I change jobs?

No. Your HRA belongs to your employer, and you forfeit any unused balance when you leave. Unlike an HSA, which you own and can transfer to a new HSA at a different employer, HRA funds do not move with you. Some employers allow you to submit claims for expenses incurred before your departure, but the deadline is usually short.

What is the difference between an HRA and an FSA?

An HRA is funded entirely by your employer; an FSA is funded by your pre-tax paycheck contributions. With an HRA, your employer decides how much to contribute and which expenses are covered. With an FSA, you decide how much to contribute (up to the annual limit), and the IRS defines what is covered. FSAs have stricter use-it-or-lose-it rules, though some employers allow a small carryover.

Can I use my HRA to pay for my spouse's medical expenses?

Yes, if your spouse is a tax dependent and the expense is otherwise covered by your plan. You can also use HRA funds for your children's medical expenses. The key is that the person receiving care must be a dependent on your tax return, and the expense must be on your employer's approved list.

What happens if I do not use my HRA by the end of the year?

It depends on your employer's plan. Some allow unused funds to roll over to the next year; others forfeit the money. A few employers offer a grace period (usually 60 to 90 days into the next year) to spend the previous year's balance. Check your plan documents or ask HR what your employer's policy is.

Can I use my HRA for over-the-counter medications?

Only if you have a prescription from your doctor. Over-the-counter pain relievers, cold medicines, and allergy medications do not may have access to without a prescription. If your doctor writes a prescription for an OTC medication, you can then use your HRA to reimburse yourself for it.