A basic HRA is an employer funded plan wherein an employer sets aside an amount of money to reimburse eligible employees for qualified expenses. For example, you might say that you will reimburse up to $2000 per year of medical expenses for 35+ hr/week employees who have been with the company for at least 2 years. The employer may deduct this as a fringe benefit and the employee does not have to pay tax on this money. Unused amounts carry forward for 1 year. Employees turn in expenses on a form using vague descriptions (prescription, Dr, Dentist, etc) so their privacy is not impeded and a service with handle all the tax forms for a very minimal fee. The employer does not have to have a separate bank account for housing unused HRA funds and they are forfeited upon employment termination.
In the past, in Delaware and most states, HRA money could not be used for purchasing major medical insurance (only Dental and Vision). Effective with 2012, DE participants may use the HRA for medical insurance premiums. This provides a great vehicle for small business owners to offer some vs. no medical benefits without opening themselves up to unknown future liabilities as they would when offering to pay medical insurance premiums as a part of a compensation package.
Contact BASE for more info: http://www.baseonline.com/