Certain plan designs threaten tax status of HRAs

Geisel, Jerry
April 2005
Business Insurance;4/11/2005, Vol. 39 Issue 15, p9
The article reports that health reimbursement arrangements (HRA) will lose their tax-favored status if employers allow employees or their dependents to take unused HRA balances in cash. The U.S. Internal Revenue Service (IRS) outlines three theoretical HRA designs, each of which would permit the cash-out of unused balances. In all three situations, the IRS rejects the designs as violating both the Tax Code and earlier rules that make clear that HRA account balances, to remain tax-favored, must be limited to the reimbursement of medical care expenses.


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