The Annual Cap on an Excepted Benefit HRA
An excepted benefit HRA has a yearly dollar cap set by the IRS and adjusted for inflation. The cap limits how much the employer can make available to each employee for the year.
What to know.
The cap applies to the amount newly made available each plan year, and the IRS publishes the current figure. Check the current number before you set the budget.
The cap is a ceiling, so an employer can set a lower amount. Whatever the amount, it has to be offered on the same terms to similarly situated employees.
Where to look next.
Excepted Benefit HRA Overview
How the plan works end to end.
QSEHRA
A different small-employer HRA with its own cap.
FSA and HRA Plan Setup
How these accounts are set up.
Setting the budget under the cap.
Because the cap is a ceiling, the harder planning question is what amount to offer. Start with what the benefit is for: filling a gap in the group plan, helping with out-of-pocket costs or giving a small extra to employees who have waived the plan. The answer shapes both the amount and the eligible expenses.
The cap is adjusted over time and the IRS publishes the current figure, so check it each year when you set the budget. Draft the plan document so that it points to the current limit instead of a fixed number, and confirm with your advisor or counsel that the structure qualifies as an excepted benefit.
Common questions on this topic.
Four questions to settle before you rely on it.
Does the cap change?
Yes. It is adjusted for inflation, so check the current figure each year.
Does unused money roll over?
Check the plan terms and current IRS guidance on carryover before relying on it.
Can employees get different amounts?
Only on uniform terms for similarly situated employees.
Where is the rule?
In the federal regulations on excepted benefits.
How do we confirm the current cap?
The IRS publishes the figure for each year, and your advisor or plan administrator can confirm it. Check it each plan year rather than relying on last year’s number.
Does an excepted benefit HRA replace group coverage?
No. It is generally paired with a group plan or other arrangement, and the conditions are technical. Your advisor can walk through whether it fits.
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General information, not legal or tax advice. Plan-specific questions belong with your counsel or CPA, and we will bring them in.
Related guides.
Excepted Benefit HRA
The overview this page belongs to.
Compliance Services
How CFH supports the compliance side of your plans.
QSEHRA
A different small-employer HRA with its own cap.
Where the Rules Come From.
The laws and rules named on this page link to the statute or regulation they come from. This is general information, not legal or tax advice, and rules change, so check the current text.
Excepted Benefit HRAs (26 CFR 54.9831-1)
The rule that sets the conditions for excepted benefits.
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