A Health Reimbursement Arrangement must be established, in writing, before the first day of the plan year, or before the date the first employee becomes eligible if that comes sooner. That is the practical answer to when an HRA must be established: the signed plan document has to exist before the coverage period it governs. The IRS has stated plainly that an HRA cannot reimburse a medical expense incurred before the arrangement is in existence, and it cannot reimburse an expense incurred before the employee enrolled.1Internal Revenue Service. IRS Notice 2002-45 For a calendar-year plan, that puts the establishment deadline at December 31 of the prior year. For a mid-year launch, the document must be signed before the chosen effective date.
No Retroactive Establishment
The rule against retroactivity is the reason the deadline matters. An employer who decides in March to help employees with January medical bills cannot draft a plan document and backdate it to January 1. Notice 2002-45 forecloses that approach: reimbursements for expenses predating the plan’s official establishment are treated as taxable compensation, not tax-free medical reimbursements.1Internal Revenue Service. IRS Notice 2002-45
The same logic applies to new hires. An employee who becomes eligible on June 1 cannot be reimbursed for a May doctor visit through the HRA. Eligibility is forward-looking from the date the plan document says coverage begins.
What “Established” Requires
Establishment is not a bookkeeping entry. It requires a formal written plan document signed and dated before the effective date. Without it, the arrangement has no legal standing and none of the tax advantages that make an HRA worthwhile.
The plan document should set out, at minimum:
- Eligibility rules, including which employees qualify and when coverage begins
- The maximum annual reimbursement amount
- Which expenses qualify, typically expenses meeting the definition of medical care in IRC Section 213(d)2Office of the Law Revision Counsel. 26 USC 213 – Medical, Dental, Etc., Expenses
- The claims procedure and decision timeline
- Confirmation that the arrangement is funded entirely by the employer
For an ICHRA, the plan document also has to assign eligible employees to one or more of the eleven permissible employee classes defined in the regulations, and it must state that individual health insurance coverage is a condition of receiving reimbursements.3eCFR. 45 CFR 146.123 – Special Rule Allowing Integration of Health Reimbursement Arrangements (HRAs) For an integrated group HRA, the document must limit eligibility to employees enrolled in the employer’s group medical plan.4U.S. Department of Labor. Technical Release 2013-03 These design choices have to be made by the establishment deadline, not sorted out later.
Summary Plan Description
HRAs that are group health plans under ERISA also need a Summary Plan Description distributed to participants. The SPD must include eligibility provisions, claims procedures, and information about appealing a denied claim.5eCFR. 29 CFR 2520.102-3 – Contents of Summary Plan Description ICHRAs and integrated group HRAs are group health plans and require an SPD. QSEHRAs are statutorily excluded from the definition of group health plan and are not subject to the SPD requirement.6Office of the Law Revision Counsel. 26 USC 9831 – General Exceptions
Notice Deadlines Tied to Establishment
Two HRA types have hard-coded employee notice deadlines that effectively pull the establishment date earlier.
A QSEHRA employer must give each eligible employee a written notice at least 90 days before the beginning of the plan year. For a calendar-year QSEHRA, that means notices delivered by early October of the preceding year. If an employee becomes eligible after the plan year has already started, the notice must be provided no later than the date the employee first becomes eligible. The statute requires the notice to state the employee’s permitted benefit amount for the year, tell the employee to report that amount to the Marketplace when applying for premium tax credits, and warn that reimbursements may be includible in gross income if the employee lacks minimum essential coverage.6Office of the Law Revision Counsel. 26 USC 9831 – General Exceptions
An ICHRA carries a similar timing rule. The annual written notice to eligible employees must generally be provided at least 90 days before the start of the plan year, and it must state the dollar amount available to each employee and provide the information they need to compare the ICHRA to Marketplace coverage, including how it may affect premium tax credit eligibility. The DOL and CMS have published model notice templates.7Centers for Medicare & Medicaid Services. Individual Coverage HRA Model Notice
The practical consequence is that a calendar-year QSEHRA or ICHRA needs the plan document and the benefit amounts finalized in early October of the prior year, not December.
What Happens if You Miss the Deadline
An HRA that fails to meet federal requirements is subject to excise tax under IRC Section 4980D. The penalty is $100 per day for each individual affected by the noncompliance, from the date the failure begins until it is corrected.8Office of the Law Revision Counsel. 26 USC 4980D – Failure to Meet Certain Group Health Plan Requirements For an employer with 25 employees, that is $2,500 per day. If the IRS identifies the violation during an examination and it has not already been corrected, the minimum penalty is $2,500 per individual, rising to $15,000 per individual where violations are more than trivial.
The tax cost is not just the excise tax. The IRS may also reclassify the employer’s contributions as taxable wages. Amounts would then need to be reported on Form W-2, and both employer and employee would owe payroll taxes on them. The tax-free treatment that motivates the arrangement in the first place is lost.
HSA Coordination Decisions Belong at Establishment
If any employees will be enrolled in an HSA-qualifying high-deductible health plan, the HRA type has to be chosen at the establishment stage, because a general-purpose HRA that reimburses medical expenses before the HDHP deductible is met disqualifies those employees from HSA contributions. The IRS recognizes specific HRA structures that preserve HSA eligibility:9Internal Revenue Service. Revenue Ruling 2004-45
- A limited-purpose HRA reimburses only dental, vision, and preventive care.
- A post-deductible HRA pays nothing until the statutory minimum HDHP deductible is met. For 2026 those minimums are $1,700 for self-only and $3,400 for family coverage.
- A suspended HRA is paused voluntarily while the employee contributes to an HSA, with any unused balance carrying forward.
- A retirement HRA pays out only after separation from service.
If the plan document does not build in one of these structures, employees enrolled in both the HRA and an HDHP lose HSA eligibility from day one. This is a design decision that cannot be fixed retroactively.
Filings the Establishment Date Triggers
Once an HRA is in place, its plan year drives several federal deadlines.
HRAs are self-insured health plans for purposes of the PCORI fee. The plan sponsor files IRS Form 720 and pays the fee by July 31 of the year following the end of the plan year.10Internal Revenue Service. Patient Centered Outcomes Research Trust Fund Fee Questions and Answers For plan years ending between October 1, 2025 and September 30, 2026, the fee is $3.84 per covered life. A calendar-year plan ending December 31, 2025 owes the fee by July 31, 2026.
Form 5500 may or may not apply. A welfare benefit plan with fewer than 100 participants at the start of the plan year that is unfunded (as most HRAs are, since claims are paid from the employer’s general assets) is exempt from Form 5500. Plans with 100 or more participants, or those funded through a trust, must file.11U.S. Department of Labor. Instructions for Form 5500
QSEHRA employers must report the total permitted benefit amount on each eligible employee’s Form W-2 in Box 12 using Code FF. The reported figure is the amount the employee is entitled to receive for the year, not the amount actually reimbursed, and it is prorated for partial-year eligibility.12Internal Revenue Service. General Instructions for Forms W-2 and W-3
Applicable large employers offering an ICHRA report the offer of coverage on Forms 1094-C and 1095-C. An ICHRA offer counts toward the 95% threshold for avoiding employer shared responsibility penalties under IRC Section 4980H, regardless of whether the ICHRA is affordable.
Putting the Timeline Together
For a calendar-year HRA taking effect January 1, 2026, the working timeline looks like this. By early October 2025, a QSEHRA or ICHRA employer needs to have benefit amounts settled and the 90-day notice out the door. By December 31, 2025, the plan document must be signed for any HRA type. Before the first covered claim is paid, the SPD (for ERISA-covered HRAs) must be distributed. After the plan year ends, PCORI and any applicable W-2 or ACA reporting follow their own deadlines.
An HRA whose paperwork lags its effective date is not a technical foot-fault. It is the difference between tax-free reimbursements and taxable wages, and between a compliant benefit and an excise tax that runs at $100 per employee per day until it is fixed.