Compliance Overview: Final Rules – Two New HRA Options for 2020

The Department of the Treasury, the Department of Labor, and the Department of Health and Human Services (the Departments) have jointly released the final expanded Health Reimbursement Arrangement (HRA) regulations. The new rules will allow HRAs to be used to pay for individual health insurance policies and creates a new type of stand-alone limited benefit HRA.


Current guidance prohibits employers from paying for an employee’s individual health insurance policy. HRAs that reimburse more than excepted benefits must also be integrated with a group health plan, meaning that HRA coverage can be offered only to employees and dependents who are also covered by the group health plan. The Departments first issued proposed HRA regulations designed to expand the use of HRAs in October 2018; those regulations have now been finalized. The new rules are effective for plan years beginning 01/01/2020.

  1. New HRA Rules Summary
  • The new rules create two new types of HRAs:
  • Individual Coverage HRA
  • An HRA funded by employers and used by employees to pay for individual health coverage.
  • This HRA can also be designed to reimburse other eligible §213(d) expenses.
  • This type of HRA cannot be offered to a class of employees who are eligible for group health plan coverage. Allowable employee classes are defined in the regulations (more below).
  1. Excepted Benefit HRA
  • A limited stand-alone HRA with an $1,800 annual maximum benefit that can be used to reimburse §213(d) medical expenses for eligible employees and dependents.
  • Unlike an individual coverage HRA, an excepted benefit HRA can be offered only to employees who are also eligible for an employer sponsored group health plan.

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