What Happens to My HRA When I Leave My Job?

A Health Reimbursement Arrangement (HRA) is an employer-funded health benefit designed to reimburse employees for qualified medical expenses and, in some cases, health insurance premiums. The funds provided are generally tax-free to the employee and tax-deductible for the employer. An HRA is not a personal bank account; employees submit claims for reimbursement after incurring eligible expenses. What happens to an HRA when employment ends depends entirely on the specific terms outlined in the employer’s plan document.

How HRAs Work Upon Job Separation

HRAs are distinct from personal savings accounts like Health Savings Accounts (HSAs) because they are employer-owned and not portable. Funds generally belong to the employer and are not automatically transferred upon job separation. The employer’s HRA plan document dictates the rules regarding access to funds after an employee leaves the company. This document outlines whether funds are forfeited, available for a limited spend-down period, or accessible through continuation coverage.

Many HRAs are designed with a forfeiture clause, meaning any unused funds are returned to the employer when employment terminates. Other HRAs may allow for a “spend-down period,” which grants a former employee a limited timeframe, such as 30, 60, or 90 days post-termination, to submit claims for eligible expenses incurred before their departure date. Some HRAs can also be integrated with COBRA continuation coverage, permitting access to the HRA funds if the former employee elects to continue their health insurance through COBRA. The specific structure chosen by the employer is detailed in the HRA plan document and the summary plan description.

Common Outcomes When You Leave Your Job

Upon leaving a job, the outcome for your HRA funds varies based on the employer’s plan design. In many instances, funds are forfeited, meaning any remaining balance is lost to the employee and reverts to the employer. This “use-it-or-lose-it” policy is common, particularly if the HRA is not integrated with COBRA or does not offer a spend-down provision.

If the HRA plan includes a limited spend-down period, former employees can submit claims for expenses incurred prior to their termination date within a specified window, typically ranging from 30 to 90 days. This allows for reimbursement of medical costs that arose while still employed. However, expenses incurred after the termination date are generally not eligible.

For HRAs classified as group health plans, COBRA continuation coverage typically applies. If an employee elects COBRA, they may also be able to continue accessing their HRA funds for a specified period, often up to 18 months, by paying the full premium plus an administrative fee. This allows the former employee to utilize the HRA balance for eligible medical expenses incurred while on COBRA. If COBRA coverage ends or is not elected, access to the HRA benefit usually terminates. It is important to consult the former employer’s HRA plan document or human resources department for the exact rules governing your specific situation.

Spending Your Remaining HRA Funds

If your HRA plan allows you to retain access to funds after job separation, utilizing the remaining balance involves specific procedural steps. Eligible expenses typically include a broad range of medical, dental, and vision costs, such as deductibles, co-pays, prescriptions, and various medical supplies. Some HRA plans may also cover health insurance premiums, including COBRA premiums, individual health insurance premiums, or Medicare premiums, depending on the HRA type and plan design.

To receive reimbursement, you generally need to submit a claim form along with appropriate proof of purchase, such as itemized receipts, pharmacy printouts, or an Explanation of Benefits (EOB) from your insurance carrier. These documents must clearly show the service or product, the date it was incurred, and the amount charged. It is important to adhere to any specified deadlines for claim submission, which are outlined in your plan’s summary plan description.

Other Healthcare Coverage Options

Beyond accessing remaining HRA funds, several other healthcare coverage options are available after leaving a job, particularly if HRA funds are forfeited or exhausted. One common option is COBRA continuation coverage, which allows eligible individuals to temporarily maintain their prior employer-sponsored health plan, including medical, dental, and vision benefits, for a limited time, typically up to 18 months. While COBRA provides continuity, the individual is responsible for paying the full premium, often with an additional administrative fee, which can be expensive.

Another option is enrolling in a plan through the Health Insurance Marketplace, established by the Affordable Care Act (ACA). Losing job-based coverage is considered a qualifying life event, triggering a Special Enrollment Period (SEP) that allows enrollment outside of the annual open enrollment period. Individuals typically have 60 days from the loss of coverage to enroll in a Marketplace plan, and many may qualify for financial assistance, such as premium tax credits, based on their income and household size to reduce monthly premium costs.

Exploring coverage under a spouse’s employer-sponsored plan is also a viable option, as job loss often qualifies for a special enrollment period to be added to their existing coverage. Additionally, short-term health plans may provide temporary coverage, but they typically offer limited benefits, do not cover pre-existing conditions, and are not subject to ACA consumer protections. It is advisable to compare these options to determine the most suitable and cost-effective healthcare solution for your specific circumstances.