HRA reimbursements are tax deductible, and employers do not need to pre-fund an account.  Reimbursements may be made from a business’ general account, allowing for greater control of cash flow reimbursement is only required when and if a medical expense is incurred. Additionally, if the employee terminates, the employer retains ownership of the funds.

Employers have great flexibility in HRA plan designs. The employer determines the maximum amount of annual reimbursements, who pays healthcare expenses first — employees or the employer through HRA reimbursements, whether HRA funds may be rolled over to the next year and the amount that can be rolled over, and whether to place a cap on the amount that can be accumulated over time and the amount of the cap.

An HRA is also a great way for employers to transition employees from the typical traditional low deductible rich benefit plan to a high deductible health plan. Business owners who may not be eligible for an HRA can set up an HSA account.