Funded HRAs

Funded HRAs are most commonly used by governmental employers.  A funded HRA is a program which usually provides participants with individual accounts and the assets are held in a trust.  Participants generally may direct their account among a menu of mutual fund investment options.  The most common types of trusts are IRC Section 115 integral part trusts or IRC Section 501(c)(9) voluntary employees’ beneficiary association (VEBA) trusts.

Funded HRAs often receive contributions of unused sick leave or vacation leave cash-outs at the time of an employee’s retirement and are primarily designed to provide post-retirement medical benefits.  However, many plans also provide in-service benefits to active employees when contributions are made prior to retirement.

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