Excepted Benefit HRA for employers
An Excepted Benefit Health Reimbursement Arrangement can reimburse eligible health expenses within a limited employer-funded benefit. It serves a different purpose from an ICHRA or QSEHRA.
Start with the requirement
To offer an EBHRA, the employer must also offer the employee a traditional group health plan that meets the applicable requirements. The employee does not have to enroll in that group plan to participate in the EBHRA. The benefit must be offered on the same terms to similarly situated employees under the governing rules.
If your goal is to stop offering group medical and help employees buy individual coverage, compare ICHRA and QSEHRA. EBHRA cannot reimburse individual major-medical premiums and does not remove the traditional group-plan offer requirement.
Read more: Federal HRA regulations
Be specific about reimbursement
Potential eligible expenses
Depending on the written plan, eligible expenses may include medical copays and deductibles, dental or vision expenses, and premiums for qualifying excepted-benefit dental or vision coverage. The administrator must verify each claim.
Not an individual-premium allowance
EBHRA cannot reimburse individual major-medical premiums, Medicare premiums or ordinary group medical premiums. COBRA or other continuation-coverage premiums are an exception to the group-premium restriction when allowed by the plan.
Do not confuse an EBHRA with an arrangement that reimburses only excepted benefits, such as certain limited dental and vision expenses. They can be subject to different requirements. Ask which arrangement is actually being proposed.
Read more: HealthCare.gov: compare HRA options · Federal HRA questions and answers
Plan-year funding
For plan years beginning in 2026, the EBHRA maximum newly available benefit is $2,200 per participant. This is a ceiling, not a required employer contribution. The limit is adjusted annually; confirm the limit for your actual plan year before adopting or renewing the arrangement.
Read more: IRS: 2026 EBHRA limit
Illustrative employer budget
This example uses a benefit below the 2026 federal maximum. Add administration expenses and any carried-forward obligations. Actual reimbursements depend on the written plan, eligible claims and available balances.
An EBHRA may allow unused amounts to carry forward. The annual cap concerns newly available benefits; permitted carryovers follow the applicable rules and plan terms. Budget for those balances instead of assuming unused amounts always disappear at year-end.
Explain when the allowance becomes available, which expenses qualify, the claim deadline and what happens when employment ends. Employees should know how to use the benefit before incurring an expense.
Design around the employee experience
01
Identify whether employees need help with dental and vision costs, medical cost sharing or another eligible expense. Tie the benefit to a specific need.
02
Validate the group-plan offer and similarly situated employee rules. Avoid health-based selection and make eligibility understandable.
03
An EBHRA that reimburses general medical expenses can interfere with HSA eligibility. Have an administrator evaluate any intended HSA-compatible design.
04
Assign documents, notices, substantiation, claims, privacy, payment timing and applicable continuation or reporting duties. Provide employees a clear contact for reimbursement questions.
Read more: IRS: HSAs, FSAs and HRAs
Common questions
Yes, enrollment in the offered traditional group plan is not required under EBHRA rules. The employer must still make the qualifying group-plan offer, and claims must meet the EBHRA’s terms.
No. A limited reimbursement allowance is not a substitute for comprehensive insurance. Employees need to understand their separate coverage choices and the financial exposure of being uninsured.
No. The separate employer group-plan offer may affect premium tax-credit eligibility. Have the employee’s offer and household circumstances reviewed before assuming exchange financial assistance is available.
Not while maintaining an EBHRA under these rules, because a qualifying traditional group-plan offer is required. Evaluate ICHRA or QSEHRA if the objective is an individual-coverage strategy.
No. The stated $2,200 limit applies to newly available EBHRA benefits for plan years beginning in 2026. ICHRA has no federal annual contribution cap, and QSEHRA has its own annually adjusted limits.
Read more: IRS: premium tax credit questions · HealthCare.gov: compare HRA options
Keep exploring
Benefit Experts
Tell us your employee count, locations, current benefits and budget goals. We can help compare insurance options and support employees shopping for individual or family coverage through Washington Healthplanfinder.
Information reviewed September 19, 2026. Eligibility, reimbursement rules and tax treatment depend on the arrangement and individual circumstances. Plan documents control the benefit; coordinate implementation with your HRA administrator and tax or legal advisers. Please use the contact form for general questions, not medical records or employee Social Security numbers.
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