Retiree HRA Savings Examples

Retiree HRA Savings Examples

The Benefits of an RHRA

You’ve dreamed about your retirement and have saved money over time so you can now enjoy your golden years. When you participate in an RHRA, you’ll keep more of your retirement savings in your bank account.

An HRA helps provide a cushion of savings that can be used for medical needs you may face during retirement. Check out the examples below and find out how you can benefit from this account. For all of our examples below, assume:

  • Your employer provides $1,000 for an individual’s HRA and $2,000 for an employee with dependents.
  • The HRA plan includes a rollover feature that allows you to carry over unused funds to the following plan year.
  • Your employer’s plan allows you to use your HRA funds to pay for a wide variety of eligible health care expenses.

IMPORTANT: Our scenarios below are merely examples. Some of the contribution amounts and other details may not be the same as your RHRA and Medicare plans. Keep in mind that your employer determines how much goes into an account each year, if the plan includes a rollover feature, and if so, how much can be rolled over to the next plan year, as well as the expenses that will be reimbursed. For specific details related to your RHRA, refer to your employer’s Summary Plan Description (SPD).

Living with a Chronic Condition

Plan Year 1: Your employer provides $2,000 that you and your spouse can use throughout the plan year to pay for your eligible health care incidentals. All of your annual checkups and preventive procedures are covered by a Medicare Part B plan, so you and your husband take advantage of the various preventive procedures. With your RHRA, staying healthy pays off since you can roll over funds to the following year.

However, when your diabetes becomes uncontrollable, there’s no need to worry about cost of the additional tests and new medicine needed to keep your blood sugar in check — your RHRA funds cover the out-of-pocket expenses that your Medicare plan doesn’t. When the plan year ends, you’ve only spent $900 of your RHRA funds and not a penny out of your pocket.

Plan Year 2: Isn’t it a great feeling to carry over $1,100** from the previous plan year? And when your employer adds in $2,000, you start the year off with $3,100 in your account. So far, there’s no need to dip into your retirement savings to pay for health care expenses.

Planning for Surgery

Plan Year 1: Your knees just aren’t what they used to be, and you’ve been talking to your doctor about a treatment plan. You can use the $1,000 that your employer contributes to your RHRA to pay for prescription drugs, ice packs, and Ace bandages. At the end of the plan year, your reimbursed RHRA expenses total $400.

Plan Year 2: You’ve rolled over $600** into your RHRA from the previous plan year, and the $1,000 contributed by your employer brings your Plan Year 2 total to $1,600. Having your RHRA funds brings peace of mind as well since you and your doctor have decided this is the year for knee replacement on your right knee.

Learn more about retiree health reimbursement arrangements by reading our RHRA Participant Guidelines page.

**Important: Not all RHRA plans include a rollover feature that allows unused funds to carry over to the following plan year. Since each employer determines the setup for their RHRA plan, please refer to your employer’s Summary Plan Description (SPD) for details related to your RHRA.