What is the health reimbursement limit for 2024?

Encouraging employees to look after their health is beneficial to employers in both the short and long term. According to the Integrated Benefits Institute, U.S. employers incurred $530 billion in costs from absences due to illness, diminished job performance, disability claims, and occupational issues — which breaks down to 60 cents for every dollar spent on employee and dependent healthcare benefits. 

Employers who are looking for a way to give employees money towards their healthcare expenses may consider offering a health reimbursement arrangement (HRA). Through an HRA, employers can make it easier for their employees to pay for the care they need to live happy and healthy lives. If you’re considering offering an HRA to your staff, you have to consider how much to reimburse. Unfortunately, some HRAs come with limits on how much an employer can reimburse with an HRA, no matter how generous their intentions are. 

So, what are the health reimbursement limits for 2024? That depends on the HRA. Let’s take a deeper look at how reimbursement limits work across different types of HRA plans. 

What is a health reimbursement arrangement?

An HRA is an employed-funded health benefits plan. The employer can use an HRA to reimburse employees tax-free for qualified medical expenses up to a predetermined allowance amount set by the employer. Depending on the type of HRA, there may be an annual reimbursement limit.

There are many types of HRAs that employers can offer their employees. Two of the most common are individual coverage HRAs (ICHRAs) and a Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs). Both ICHRAs and QSEHRAs allow employees to purchase individual insurance and receive tax-free reimbursement, but they differ in terms of reimbursement limits and eligibility criteria, among other things. Employers who offer HRAs need to follow certain compliance requirements, including sending an HRA notice and other plan documents to eligible employees that describe the HRA’s terms in detail. 

What are the health reimbursement arrangement limits for 2024?

All employers who offer HRAs can only reimburse up to the legal limit, if any, set by the IRS. The type of HRA dictates that limit, if any.

QSEHRA

A qualified small employer health reimbursement arrangement (QSEHRA) is a type of HRA for small employers. Typically, these employers don’t offer group health plans and have fewer than 50 full-time employees. By contributing to a QSEHRA, small businesses can help support their employees’ health and wellness without having to offer a traditional group healthcare plan (the employee will need to secure minimum essential coverage to access the QSEHRA funds). 

With a QSEHRA, the IRS sets the annual contribution limit. In 2024, the limit rose from $5,850 to $6,150 for what it terms “self only” employees and from $11,800 to $12,450 for employees with families. 

ICHRA

An individual coverage health reimbursement arrangement (ICHRA) has no reimbursement limit. With an ICHRA, a business can choose to offer employees a tax-free monthly allowance of any amount, provided that they’ve complied with any minimum obligations to provide affordable care under the Employer Mandate. The employee can then use this money to buy health insurance coverage. 

What are the limits for HSAs and FSAs for 2024?

Some employers also offer Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). While HRAs are reimbursement arrangements under which an employee is reimbursed tax-free for medical expenses, HSAs and FSAs are accounts in which an employer or employee can contribute money tax-free. 

Health Savings Accounts (HSA)

Employees can use funds in their HSAs for medical expenses like copayments, coinsurance, and deductibles. Another major benefit associated with HSAs is that interest earned on money in the HSA is not taxable. 

Typically, you can’t use HSA funds to pay healthcare premiums which is a major downside of HSAs. Another hurdle is that for an employee to be able to utilize HSA funds, they must also have access to an HSA-eligible plan. You may hear these plans referred to as a High Deductible Health Plan (HDHP).

HSA contribution limits depend on a handful of factors, including:

• Age of the account holder

• Type of HDHP coverage

• When during the year the individual becomes eligible or ineligible for the HSA

In 2024, those with self-only HDHP coverage can contribute to their HSAs up to $4,150, and those with a family HDHP coverage can contribute up to $8,300.

Flexible Spending Accounts (FSA)

Employees can use a flexible spending account (FSA) to cover eligible healthcare costs such as prescriptions, copayments, medical equipment, deductibles, and coinsurance and to save for their future healthcare costs. Like an HSA, FSA funds can’t be used on insurance premiums. 

Employees can contribute up to $3,200 annually. The employee’s spouse can also add up to $3,200 to the account. Any money the employee contributes to their FSA is tax-free, which helps workers stretch their hard-earned dollars further. FSAs are pretty flexible and make it possible for the employee to pay for a spouse or dependent’s health expenses in addition to their own. 

The Takeaway

The type of HRA you choose to extend to your employees can impact how much you can contribute to their accounts. That being said, any contribution will be appreciated by your employees and can help them navigate the rising costs in healthcare. If you do want to avoid contribution limits and believe an ICHRA is the right call for your business, sign up for a free demo of Thatch, so you can explore better coverage for your employees. You can save an average of $1,620 per year per employee while offering them great benefits.