IRS Announces Excepted Benefit HRA Limit for 2026

On May 1, 2025, the IRS released the inflation-adjusted limit for excepted benefit health reimbursement arrangements (EBHRAs) for plan years beginning on or after Jan. 1, 2026. Effective for 2026 plan years, the maximum annual employer contribution for an EBHRA will increase to $2,200 (up from $2,150 for plan years beginning in 2025).  

EBHRAs  

An EBHRA is a relatively new type of employer-funded health care account that reimburses employees for their eligible medical expenses on a tax-free basis. Employers can use EBHRAs to supplement their traditional group health plan coverage and help employees with their out-of-pocket medical expenses, including deductibles, copayments, and coinsurance amounts.  

Employers of all sizes may offer EBHRAs. Although an employer must offer a traditional group health plan, employees are not required to enroll in the employer’s group coverage (or any other type of coverage) to be eligible for the EBHRA.  

As an excepted benefit, an EBHRA is not subject to the same compliance requirements that apply to traditional HRAs. For example, EBHRAs are not subject to the Affordable Care Act’s market reforms or HIPAA’s portability rules. However, the EBHRA must be made available to all similarly situated employees on the same terms, without regard to health factors. Also, an EBHRA cannot be used to reimburse premiums for individual health insurance coverage, group health coverage (other than COBRA coverage or other group continuation coverage) or Medicare coverage.  

Like other types of HRAs, EBHRAs are subject to ERISA unless an exception applies. This means that Form 5500 may be required, and participants should receive a Summary Plan Description of the EBHRA and its benefits. EBHRAs are also subject to HIPAA’s privacy and security requirements and the nondiscrimination rules for self-insured health plans.  

Annual Contribution Limit  

Only employers can contribute to HRAs, including EBHRAs. EBHRAs are subject to a maximum amount that may be made newly available for the plan year. This maximum amount is adjusted annually for inflation. These adjusted limits are as follows:  

For plan years beginning in 2025, the contribution limit is $2,150; and For plan years beginning in 2026, the contribution limit is $2,200.  

This limit applies to each eligible employee, regardless of whether they have single or family health coverage. While an EBHRA may reimburse a spouse’s or dependent’s eligible medical expenses, the limit is not higher for employees with family members.  

Provided by De La Torre & Associates Insurance Services, Inc.

This Legal Update is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. © 2025 Zywave, Inc. All rights reserved.