453 / What is an excepted benefit HRA?

Beginning in 2020, employers are permitted to offer excepted benefit HRAs under the 2019 HRA regulations. Employees can use the funds in an excepted benefit HRA to purchase certain "excepted" benefits and short-term health insurance coverage. Unlike with individual coverage HRAs, employers can offer both the excepted benefit HRA and group health insurance coverage to the same employee without any requirement that the employee actually enroll in the group health coverage.

Excepted benefit HRAs can be used to pay co-pays, dental or vision coverage, short-term health insurance premiums and other medical expenses not covered under the group health plan. The funds cannot be used to pay individual health insurance premiums or Medicare premiums.

The excepted benefit HRA is funded solely by the employer. The annual contribution limit is currently $2,250 per year in 2027 (up from $2,200 in 2026).¹