What is an HRA? - YouTube

hi Lee Phillips again and I want to talk  to you about what is an HRA it's called  

a Health Reimbursement Arrangement or a Health  Reimbursement Agreement or whatever you want to  

call it it is another type of benefit plan under  ERISA the Employee Retirement Income Security Act  

and it's kind of an unusual plan if  you have a little company you can  

set it up ideally you have employees and and and  and they use it you can use it for an individual  

owned company one owner one employee it gets  a little snakier if you do that but it can be  

done this isn't as easy to set up as an HSA health  savings account but you can use it the advantage  

is you can put as much money as you want into it  so you put money in two thousand five thousand  

whatever it is ten thousand this year the only  restriction is is it's supposed to be reasonable  

to meet medical needs well I mean if you break  your leg today it can be six million dollars right  

so what's reasonable to meet medical needs the  catch is when you put the money in from the  

company and you do have to include employees  you have to include employees in the HSAs too  

and all pretty much all of the benefit plans  and all of the retirement plans under ERISA  

there are restrictions to to prevent  you from just providing it to you  

and not providing it to the employees so most  of you don't have a lot of employees though  

you put the money in the company gets a tax  deduction that money sits in the account  

and you reimburse yourself for health related  expenses just like you would at an HSA except  

in this case we do not need an insurance  company to manage this money the company  

sets up their general checking account and then  they have another checking account that we call  

the HRA accounts in the same bank you move  money from general checking over to HRA checking  

how much money there's no limit basically you  move it over the company gets a deduction for it  

it goes into the account and you can use it  to reimburse yourself for health qualified  

health related expenses that's basically anything  that's not an over-the-counter it's the eyeglasses  

it's the dentist it's all the medical stuff that  you'd normally think of the prescriptions and the  

insurance premiums we forgot to tell you that in  the HSA the insurance premiums are also included  

so it's a way of providing health care insurance  and health care reimbursement what it does is it  

makes all of your health care stuff not tax  deductible but tax free it comes out of the  

company the company gets a deduction over into the  HRA account you reimburse out of the HRA account  

but that comes to you there's no 1099 W-2  nothing it just comes to you as a reimbursement  

if the account is ever audited you need all the  receipts to explain why we paid money out of  

the HRA account this is similar to an HSA in that  it's not a 125 there's no use it or lose it rules  

if you build money up in the account it stays in  the account and the company you can continue to  

claim against that money until it's all  gone but you can actually build money  

in the account you can invest the money in  the account it grows in the account tax-free  

and you get to control it you get to get it back  at any time for health-related expenses tax-free  

now if you ever terminate the plan the money  in the plan will come to the then participating  

employees there's no vesting in this when  the employee leaves they don't have a claim  

against the money that's been put away for them

so I can keep the plan going and after I  close my little company down I won't actually  

physically close it down but when I retire  all employees in my company they go bye-bye  

the account is still there though they didn't  take their money with them so you can use this  

account for health-related expenses in your  old age long-term care all sorts of stuff  

or you could terminate the plan and the money in  the plan comes to the then participating employees  

as income you have to pay income tax on it  but you got to pay income tax on your 401k  

money and all that stuff when you get it back to  your standard IRAs so it really isn't a bad deal  

guys and you can spend this money for health  related stuff tax free the HRA is a really  

cool plan if you can qualify for it it it it's  really neat guys so don't forget about the HRA  

not as many a pretty much anybody can any little  business can qualify for an HSA and the insurance  

company is going to set it up for them the  HRA more complicated you've got to set it up  

and I have a kit that teaches you how to  set it up I'm sure you're stunned about that  

but you can set it up the company can operate it  you don't need third parties there's no tax return  

that the HRA files every year like there is a 401k  they have to file a tax return but there's no tax  

return there's no nothing basically there's  an independent banking account that sits here  

it's pretty cool guys check it out this is  Lee Phillips i'm speaking on HRAs health  

reimbursement arrangements agreements whatever you  want to call them and don't forget to subscribe