Health Care Reimbursement Accounts
What Are Health Care Reimbursement Accounts?
Health care reimbursement accounts are employer-sponsored benefit accounts that allow employees to set aside or receive funds to pay for qualified medical expenses. These accounts help employees manage healthcare costs by using tax-advantaged funds.
Examples include health reimbursement arrangements (HRAs) and flexible spending accounts (FSAs).
Why It Matters
Medical expenses such as prescriptions, doctor visits, and medical equipment can add up quickly. Health care reimbursement accounts help employees pay these costs using funds that may have tax advantages.
This can help reduce overall healthcare expenses.
How Health Care Reimbursement Accounts Work
Employers establish the account as part of an employee benefits program.
Depending on the account type:
- employers may contribute funds
- employees may contribute pre-tax income
- funds can be used for qualified medical expenses
Some accounts have annual contribution limits or use-it-or-lose-it rules.
Example
An employee may use funds from a reimbursement account to pay for prescription medications or medical supplies.
Health Care Reimbursement Accounts vs Health Savings Accounts
- Reimbursement accounts are usually employer-sponsored benefit accounts.
- Health savings accounts are individual accounts paired with high-deductible health plans.
FAQs About Health Care Reimbursement Accounts
Who funds these accounts?
Employers, employees, or both depending on the account type.
What expenses qualify for reimbursement?
Qualified medical expenses such as doctor visits and prescriptions.
Do funds expire each year?
Some plans require funds to be used within the plan year.
Related Terms
