Can I Withdraw Money From My HRA Account? The Definitive Guide

The short answer is: generally, no, you cannot simply withdraw money from your Health Reimbursement Arrangement (HRA) account for any purpose. HRAs are specifically designed to reimburse you for qualified medical expenses, not to function as a general-purpose savings account. You need to incur an eligible expense first, and then submit a claim for reimbursement. Now, let’s delve into the nuances.

Understanding the HRA Landscape: More Than Just a Savings Account

An HRA is a powerful tool, but understanding its limitations and functionalities is crucial to maximizing its benefits. It’s important to remember that the funds in your HRA don’t truly “belong” to you in the same way money in your personal bank account does. They are held by your employer and used to reimburse eligible medical expenses you incur. Think of it more as a pre-approved line of credit specifically for healthcare.

HRAs are employer-funded plans, meaning your employer contributes the money, and you, as an employee, use it to pay for qualified medical expenses. This makes HRAs different from Health Savings Accounts (HSAs), which are portable and individually owned. The key to unlocking HRA funds lies in understanding which expenses are deemed “qualified.”

The Golden Rule: Qualified Medical Expenses

The lynchpin of HRA reimbursements is the definition of “qualified medical expenses.” The IRS defines these expenses in Publication 502, and generally, they include costs for:

• Medical care: Doctor visits, hospital stays, physical therapy, mental health treatment, and substance abuse programs.
• Dental care: Check-ups, cleanings, fillings, root canals, orthodontics, and dentures.
• Vision care: Eye exams, eyeglasses, contact lenses, and laser eye surgery.
• Prescription medications: This includes drugs prescribed by a doctor and over-the-counter medications prescribed by a doctor or required for medical purposes.
• Medical equipment: Crutches, wheelchairs, walkers, blood sugar monitors, and other durable medical equipment.

However, there are crucial caveats. For example, cosmetic procedures are generally not reimbursable unless medically necessary. Similarly, health insurance premiums are only reimbursable under specific types of HRAs, such as Individual Coverage HRAs (ICHRAs) or Qualified Small Employer HRAs (QSEHRAs). Finally, the expenses must be incurred during the plan year, so saving old receipts will not do you any good.

Reimbursement Procedures: Showing the Money Trail

The process for getting reimbursed from your HRA usually involves these steps:

1. Incur the expense: Pay for the qualified medical service or product out-of-pocket.
2. Gather documentation: Collect receipts, invoices, or Explanation of Benefits (EOB) statements from your healthcare provider or insurance company.
3. Submit a claim: Most HRAs have online portals or paper claim forms for submitting your reimbursement request.
4. Await approval: Your HRA administrator will review your claim and documentation to verify eligibility.
5. Receive reimbursement: If approved, you’ll receive reimbursement via direct deposit or check, typically within a few business days or weeks.

Your employer or HRA administrator will provide you with detailed instructions on the specific reimbursement process for your plan. It is crucial to follow their guidelines meticulously to ensure your claims are processed quickly and efficiently.

Leaving Your Employer: What Happens to Your HRA Funds?

This is a critical question, and the answer depends on the specific HRA plan rules. Unlike an HSA, which is yours to keep, your HRA balance typically does not automatically transfer with you when you leave your employer. However, there are some possibilities:

• Run-out period: Some HRAs offer a “run-out period” after termination, allowing you to submit claims for expenses incurred while you were still employed. This period can range from a few weeks to several months.
• COBRA continuation: In some cases, you may be able to continue your HRA coverage under COBRA, but you will likely have to pay the full cost of the coverage yourself. This is usually not a cost-effective option.
• Portability (rare): Very few HRAs offer portability, meaning the ability to transfer your unused funds to another HRA or a different type of health plan.

Your best bet is to carefully review your HRA plan documents and contact your HR department or HRA administrator to understand your options upon termination of employment. It’s generally advisable to spend down your HRA balance before you leave a job, if possible, to avoid losing those funds.

HRA Variations: A Tailored Approach to Healthcare

Different types of HRAs exist, each with slightly different rules and features. The most common types include:

• Traditional HRA: Reimburses employees for out-of-pocket medical expenses, often in conjunction with a group health insurance plan.
• Individual Coverage HRA (ICHRA): Allows employees to purchase their own individual health insurance plans and get reimbursed by their employer. This is especially useful for companies without a traditional group health plan.
• Qualified Small Employer HRA (QSEHRA): Designed for small employers with fewer than 50 employees. It allows them to reimburse employees for health insurance premiums and other medical expenses.

Understanding the specific type of HRA you have is essential, as the rules regarding qualified expenses, reimbursement procedures, and portability can vary.

Frequently Asked Questions (FAQs)

Here are some frequently asked questions to help you navigate the complexities of HRA accounts:

1. What happens to the money in my HRA if I don’t use it all by the end of the year?

Generally, unused funds in a traditional HRA revert back to your employer at the end of the plan year. Some HRAs may offer a carryover provision, allowing you to roll over a portion of your unused balance to the next year. Consult your plan documents for details. ICHRAs and QSEHRAs may have different rules regarding unused funds, so refer to your plan details for specific information.

2. Can I use my HRA to reimburse my spouse’s or dependent’s medical expenses?

Yes, you can typically use your HRA to reimburse the qualified medical expenses of your spouse and dependents, as long as they are covered under your health plan, if applicable.

3. Are over-the-counter (OTC) medications reimbursable through my HRA?

While previously requiring a prescription, the CARES Act now allows reimbursement for many OTC medications without a prescription. However, some HRA plans may still require a doctor’s note or prescription for specific OTC items, so check your plan details.

4. Can I use my HRA to pay for health insurance premiums?

Generally, health insurance premiums are not reimbursable under a traditional HRA. However, ICHRAs and QSEHRAs are specifically designed to allow reimbursement for individual health insurance premiums.

5. What documentation do I need to submit a claim to my HRA?

Typically, you’ll need a receipt or invoice from the healthcare provider or pharmacy, along with an Explanation of Benefits (EOB) from your insurance company, if applicable.

6. How long does it take to get reimbursed from my HRA?

Reimbursement times vary depending on the HRA administrator and the complexity of the claim. Generally, you can expect to receive reimbursement within a few business days to a few weeks after submitting your claim.

7. Can I use my HRA to pay for alternative therapies like acupuncture or chiropractic care?

Yes, acupuncture and chiropractic care are generally considered qualified medical expenses if they are provided by licensed practitioners for the diagnosis, cure, mitigation, treatment, or prevention of disease.

8. Are weight loss programs reimbursable through my HRA?

Weight loss programs are only reimbursable if they are prescribed by a doctor for the treatment of a specific medical condition, such as obesity, diabetes, or heart disease.

9. Can I use my HRA to pay for travel expenses related to medical care?

Yes, travel expenses directly related to medical care are generally reimbursable, including transportation costs (e.g., mileage, airfare, train tickets) and lodging expenses (up to a certain limit per night).

10. What happens to my HRA if my employer is acquired or merges with another company?

The impact on your HRA depends on the terms of the acquisition or merger. The acquiring company may choose to continue the existing HRA, modify it, or terminate it altogether. You should receive communication from your employer or the acquiring company regarding the changes to your benefits.

11. Can I contribute to both an HRA and an HSA at the same time?

Generally, you cannot contribute to both an HRA and an HSA at the same time, unless your HRA is a “limited purpose HRA” that only covers dental, vision, or preventive care expenses. If you or your spouse are covered by a general-purpose HRA, your eligibility to contribute to an HSA may be affected.

12. Where can I find more information about my HRA plan?

Your primary source of information should be your HRA plan documents, which your employer is required to provide. You can also contact your HR department or HRA administrator for assistance.

In conclusion, while directly withdrawing money from your HRA account for non-medical purposes is not permitted, understanding its eligible uses and reimbursement procedures allows you to effectively manage your healthcare expenses and maximize the benefits offered by your employer. Careful planning and diligent record-keeping are your best allies in navigating the HRA landscape.