What is a key feature of Health Reimbursement Accounts (HRAs)?

Health Reimbursement Accounts (HRAs) are designed to provide employees with a way to pay for eligible medical expenses with a benefit to both employer and employee. One of the key features of HRAs is that unused amounts in the account can be carried over to future years. This means that if an employee does not use all the funds available in their HRA in a given year, any remaining balance can be saved for future medical expenses, giving employees a stronger incentive to manage their healthcare spending wisely.

This feature is beneficial because it enhances the utility of the account, allowing employees to accumulate funds that can contribute to their healthcare costs down the line, particularly in the event of larger medical expenses. In contrast, some other accounts like Flexible Spending Accounts (FSAs) typically have a "use it or lose it" rule, which can discourage employees from contributing to the account. By allowing carryover, HRAs provide more flexibility and encourage employees to engage with their healthcare decisions thoughtfully.