Dear Tax Talk,
Continue Reading Below
Does my employer have to include any information on my W-2 at the end of a year in which it contributed to a health reimbursement account, assuming that all payouts were for qualified medical expenses during that tax year? -- Todd
No, your employer does not need to include information on your W-2 for any year it contributes to a health reimbursement arrangement, or HRA, on your behalf, and the contributions made on your behalf are not included in your income.
HRAs are one of the tax-favored health plans that employers can offer their employees. Some others that employers can offer are:
- Health savings accounts, or HSAs.
- Medical savings accounts, or MSAs.
- Flexible spending arrangements, or FSAs.
Many employers recognize the importance of providing their employees with health care benefits, and the HRA is one such plan that is allowed by the IRS. The employer sets up its own plan and then contributes funds to the employee's account. When the employee incurs eligible expenses, they are submitted to the employer for a tax-free reimbursement. The plan document defines what expenses are eligible and can include out-of-pocket medical, dental and vision expenses that are not paid for by insurance or other qualified health plans, such as FSAs and HSAs. It can even include eligible health insurance premiums.
Consider yourself to have a generous employer if it has an HRA for the benefit of the employees. There is required paperwork to be maintained by the employer on these plans, but it is well worth the effort in terms of employee satisfaction -- especially today, when it seems the cost of health care is rising dramatically.
Thanks for the great question and all the best to you.
Ask the adviser
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.
Copyright 2014, Bankrate Inc.