What an Excepted Benefit HRA Does
The excepted benefit HRA solves a specific problem: what to offer an employee who is eligible for your group plan but does not take it, without running afoul of the rules that make most standalone arrangements unlawful.
Because it is classed as an excepted benefit, it sits outside the ACA market reforms. In exchange it accepts three constraints — an annual cap, a requirement that a group plan be offered alongside it, and limits on what it can reimburse.
For the year-round side of benefits cost, read about our health and cost strategy.
| 2026 | 2027 | |
|---|---|---|
| Maximum employer contribution per employee | $2,200 | $2,250 |
Those come from IRS Rev. Proc. 2025-19 and Rev. Proc. 2026-24. Amounts left unused may carry forward, and a carryover does not count against the next year’s limit.
The Three Conditions
- A group health plan must be offered. The employee has to be eligible for other group coverage from you — but crucially does not have to enrol in it.
- It cannot reimburse most premiums. Individual market premiums and most group premiums are out. Dental, vision and other excepted benefit premiums are in, as are COBRA premiums and short-term limited-duration coverage.
- It must be uniformly available. Same terms for all similarly situated individuals. No larger amount for executives.
Where It Actually Fits
The clearest use is the employee who waives your medical plan — often because they are on a spouse’s coverage — and therefore receives nothing from a benefits budget they are nominally part of. An EBHRA gives them roughly two thousand dollars of usable benefit without disturbing the group plan or triggering ICHRA rules.
The second use is topping up a high-deductible design. If you have moved the deductible up to hold premium down, an EBHRA can absorb part of the difference — though if HSA eligibility matters, it has to be limited to dental and vision rather than general medical expenses, or it will disqualify contributions.
How It Compares to the Alternatives
| EBHRA | ICHRA | QSEHRA | |
|---|---|---|---|
| Annual cap | $2,200 / $2,250 | None | Set annually by the IRS |
| Group plan required | Yes, offered | No — replaces it | No — cannot have one |
| Reimburses individual premiums | No | Yes | Yes |
| Employer size | Any | Any | Under 50 FTEs |
The distinction that matters: an ICHRA replaces your group plan, a QSEHRA is for employers who do not have one, and an EBHRA sits beside the plan you already run. They are not competing options so much as answers to different questions. Our guides to the ICHRA and medical expense reimbursement plans cover the other two routes.
If you have employees waiving coverage and nothing to offer them, this is usually the cheapest thing you can do about it. We can model what it costs against your own waiver count.
Questions We Get
What is an excepted benefit HRA?
An employer-funded reimbursement arrangement that sits alongside a group health plan and is capped at an annual limit — $2,200 for 2026 and $2,250 for 2027. Because it is an excepted benefit it is not subject to the ACA market reforms that block most standalone arrangements.
What is the EBHRA limit for 2026 and 2027?
$2,200 per employee for plan years beginning in 2026, rising to $2,250 for 2027. The figures come from IRS Rev. Proc. 2025-19 and Rev. Proc. 2026-24. Unused amounts may be carried over, and a carryover does not count against the following year’s cap.
Does an employee have to enrol in the group plan to use an EBHRA?
No, and this is the feature that makes it useful. The employer must offer a group health plan the employee is eligible for, but the employee does not have to take it. That lets an employer put something meaningful in front of a waiving employee without running an ICHRA.
Can an EBHRA reimburse individual health insurance premiums?
Generally no. It cannot be used to reimburse individual market premiums or most group premiums, which is a deliberate line separating it from an ICHRA. It can reimburse excepted benefit premiums such as dental and vision, COBRA premiums and short-term limited-duration coverage, along with general qualified medical expenses.
Does an EBHRA affect HSA eligibility?
It can, on the same logic as any other HRA. An EBHRA reimbursing general medical expenses from the first dollar will disqualify an employee from contributing to an HSA. Limiting it to dental, vision and other excepted benefits preserves eligibility.
Does the EBHRA have to be offered to everyone?
It must be made available on the same terms to all similarly situated individuals, which is the uniformity condition. You cannot offer a larger amount to executives or restrict it to a favoured group — the same discrimination problem that catches employers out on self-insured arrangements generally.
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