Add one for a gap. Skip it if you want out.
It makes sense when
You're keeping the group plan, and some costs land outside it: dental and vision bills, deductibles and copays, or excepted-benefit dental and vision premiums. You want a fixed, capped budget aimed at that gap, open to employees who waive your plan as well as those who enroll.
It doesn't when
You plan to drop group medical, you need to help with individual major-medical premiums, or your employees use an HSA and you had a general-purpose design in mind. Look at an ICHRA or the HSA and pre-tax options instead.
Four rules shape every EBHRA.
- A traditional group health plan that satisfies the rules must be offered to the employee; joining it is optional
- Same terms for all similarly situated employees
- No more than $2,200 per participant newly available for plan years starting in 2026, adjusted every year
- No premiums for individual major-medical coverage, Medicare or regular group medical, except COBRA and other continuation premiums if the plan allows
Watch the label on any proposal. An EBHRA isn't the same thing as an HRA that pays only for excepted benefits, like some limited dental and vision costs, and the two can follow different rules. Ask which one you're being shown.
The $2,200 cap is an upper limit, and you can fund less. Check the figure that applies to your plan year before adopting or renewing. To compare an EBHRA with the other arrangements, see our HRA decision guide.
Size the allowance to the gap, not to the cap.
Name the gap
Fund one problem on purpose.
If the written plan allows, an EBHRA can cover deductibles and copays under the medical plan, dental and vision bills, and the premium for an excepted-benefit dental or vision plan. Pick the cost your employees actually feel and design around it. The administrator checks every claim.
Budget for waivers
Eligibility follows the offer, not enrollment.
Employees who decline your group plan can still use the EBHRA, so count everyone offered the plan. Illustrative: 25 employees are offered the group plan and 18 enroll. A $900 annual EBHRA for all 25 is a $22,500 ceiling before administration fees.
Decide on carryover
Balances can build.
An EBHRA may let unused amounts roll forward. The yearly cap limits newly available dollars, so carried balances sit on top of it. Set the carryover rule up front and budget for it.
Protect HSA contributions
General medical reimbursement is the conflict.
If the EBHRA pays general medical costs, employees with an HSA can lose the ability to contribute. Have the administrator review any HSA-compatible design before launch.
Check the tax-credit side
The group offer still counts.
Adding an EBHRA doesn't change the fact that employees were offered your group plan, and that offer can change whether someone qualifies for premium tax credits. Anyone weighing exchange coverage should have their situation reviewed first.
Set it up with the renewal, not after it.
At renewal
Confirm who is offered the group plan and which employees are similarly situated. Pick the gap and the allowance.
Before the plan year
Check the cap for that plan year, adopt the written plan and choose an administrator. Assign notices, claims, privacy and any continuation or reporting duties.
At open enrollment
Explain when the allowance opens, what qualifies, how long employees have to submit claims and what happens at termination. Run it through benefits enrollment with everything else.
During the year
Claims are verified and paid. Give employees one contact for reimbursement questions.
At year-end
Apply the carryover rule, then compare the allowance with what employees actually used.
Enough to size it in one pass.
- Your current plan summaries, including each SBC
- Enrollment and waiver counts by employee class
- The cost you want to help with, in your own words
- Who contributes to an HSA today
- Your plan year and renewal date
We'll come back with an allowance range, a budget ceiling and the design calls the administrator needs. If you're also reviewing COBRA administration, we coordinate third-party administrators, and vendor fees may apply.
What employers ask before adding one.
An employee is on a spouse's plan and waived ours. Can they use the EBHRA?
Yes, as long as your group plan was offered to them and they're in the eligible group. Joining your plan isn't required to use an EBHRA.
Can the EBHRA reimburse COBRA premiums?
It can, if the plan allows it. Continuation premiums are the exception to the rule against paying group medical premiums.
Can managers get a larger amount than staff?
Terms have to match for similarly situated employees. Whether two groups count as similarly situated is a call for the administrator and your adviser, so settle it before you announce amounts.
What happens to an employee's balance when they leave?
The written plan decides. Set the claim deadline and the termination rule before launch, and tell employees both at enrollment.
We were quoted a limited dental and vision HRA. Is that an EBHRA?
Not necessarily. An HRA limited to excepted benefits is a different arrangement with different requirements. Ask the vendor which one it is before you compare prices.
Where these rules come from.
Sources: IRS: HRA regulations, IRS: 2026 EBHRA limit, CMS: HRA questions and answers, HealthCare.gov: HRA options, IRS Publication 969 and IRS: premium tax credit Q&A. General information, not legal or tax advice.
Price an EBHRA next to your renewal.
Tell us the gap you want to close. We'll size an allowance against your census and current plan, with no obligation.