Health Reimbursement Account - HRA

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DEFINITION of 'Health Reimbursement Account - HRA'

Employer-funded plans that reimburse employees for incurred medical expenses that are not covered by the company's standard insurance plan. Because the employer funds the plan, any distributions are considered tax deductible (to the employer). Reimbursement dollars received by the employee are generally tax free.

The downside to HRAs is that companies may choose whether to start or fund such a plan. Also, if a plan has already been established, the employer has the right to cancel it at virtually any time.

BREAKING DOWN 'Health Reimbursement Account - HRA'

As a benefit, an employee may be reimbursed for qualified medical expenses from his or her employer. The funds received are tax-free, but because the plan is employer funded, the employer has the right to cancel or alter the distributions at any time. In spite of this, many employees consider HRAs as a valuable benefit given the rising cost of health care.

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