About Health Reimbursement Accounts* 

Health Reimbursement Accounts or HRAs are a new, innovative way to insure for day-to-day medical expenses while saving for the future. Like an IRA or a 401k, an HRA is a tax-deductible retirement savings account.   However, an advantage to an HRA is that the money within the account can be used at any time for a wide variety of qualified medical expenses without being subject to federal income taxes or penalties.

Enacted as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, HRAs became available on January 1, 2004. The legislation permits any individual enrolled in a qualified medical insurance plan to open an HRA.

The key components of HRAs are:

• The money contributed to an HRA is tax-free and may be deducted from that year's Federal Income Taxes "off the top" regardless of whether that individual itemizes.
  
  
• Money within the HRA rolls over each year and will grow as the individual continues to contribute to the account.
  
  
• At any time an individual may withdraw funds tax-free provided the money is used to pay for qualified medical expenses.
  
  
• At age 65 and older individuals can withdraw money from their HRA for any reason without incurring a tax penalty.