Excepted Benefit HRA (EBHRA): The 2026 Employer Guide

An Excepted Benefit HRA is a narrow type of health reimbursement arrangement that runs alongside a traditional group health plan rather than replacing it. It caps out at $2,200 per employee in 2026, up from $2,150 in 2025, and it cannot reimburse individual health insurance premiums the way a QSEHRA or ICHRA can. What it does well is fill the gap a high-deductible plan or a skinny group plan leaves behind: dental work, vision care, copays, and coinsurance an employee would otherwise pay entirely out of pocket. Here is how the EBHRA actually works, what makes it different from every other HRA type, and where it fits alongside a Section 125 plan.

For the broader HRA landscape, see our HRA vs HSA comparison and our ICHRA vs QSEHRA guide. This piece covers the one HRA type neither of those touches.

What Is an Excepted Benefit HRA?

An Excepted Benefit HRA is an employer-funded account that reimburses employees tax-free for certain limited medical expenses, without counting as the employee's primary health coverage under federal law. The Department of Labor, the Department of Health and Human Services, and the Treasury Department jointly created the EBHRA category in 2019 final regulations to give employers a way to help with out-of-pocket costs like dental and vision care without triggering the full set of rules that apply to major medical coverage. The employer funds the account entirely. The employee never contributes and never owns the balance if they leave the company.

How Is an EBHRA Different From a QSEHRA or an ICHRA?

The core difference is that an EBHRA requires the employer to also offer a traditional group health plan, while a QSEHRA or an ICHRA can stand entirely on its own. Under IRS and Department of Labor rules, an employer offering an EBHRA must make a non-account-based group health plan, an ordinary medical plan the employer already sponsors, available to the same employees who are eligible for the EBHRA. The employee does not have to actually enroll in that group plan to use the EBHRA, but the offer has to be there. A QSEHRA, covered in our QSEHRA guide for small business, and an ICHRA, explained in how an ICHRA works, both work the opposite way: neither requires the employer to sponsor a group plan at all, and both can reimburse individual market premiums directly. An EBHRA cannot reimburse individual health insurance premiums under any circumstance.

What Is the 2026 EBHRA Contribution Limit?

The 2026 EBHRA contribution limit is $2,200 per employee, up from $2,150 in 2025, under IRS Revenue Procedure 2025-19. This limit applies per employee regardless of whether the employee has self-only or family coverage under the accompanying group health plan, a different structure than an HSA or a QSEHRA, both of which set separate self-only and family limits. The $2,200 cap is indexed for inflation each year, so employers need to confirm the current-year figure before setting a plan year allowance rather than reusing last year's number.

What Can an EBHRA Reimburse?

An EBHRA can reimburse dental and vision expenses, copays, coinsurance, deductibles, and premiums for excepted benefits like standalone dental or vision insurance, short-term limited duration insurance, and COBRA continuation coverage. It cannot reimburse premiums for individual major medical insurance or for the employer's own traditional group health plan, with the single exception of COBRA premiums for that same group plan. This premium restriction is the point most employers get wrong: an EBHRA is built to cover the costs a group plan leaves the employee paying directly, not to replace or subsidize the premium for that plan itself.

Does an Employee Have to Enroll in the Group Health Plan to Use the EBHRA?

No. An employee can decline the employer's traditional group health plan entirely and still receive EBHRA reimbursements, as long as the employer made that group plan available to them. This is the specific feature that makes an EBHRA useful for employers with employees on a spouse's plan or on Medicare who still want help with dental, vision, and out-of-pocket costs. The requirement is that the offer of group coverage exists, not that the employee accepts it.

Is an EBHRA Subject to COBRA?

Yes, generally. An EBHRA is still considered a group health plan for COBRA purposes even though it qualifies as an excepted benefit for other regulatory purposes. An employer subject to COBRA, generally one that employed 20 or more employees on more than half its typical business days in the prior calendar year, must offer COBRA continuation coverage on the EBHRA itself to qualified beneficiaries after a qualifying event like termination or reduced hours, the same way it must for the paired group health plan.

Are EBHRA Contributions Exempt From FICA?

Yes. Employer contributions to an EBHRA are excluded from the employee's federal taxable wages and from the Social Security and Medicare wage base, the same treatment that applies to a QSEHRA or an ICHRA. Since the EBHRA is entirely employer-funded with no employee election, there is no payroll deduction involved at all, which makes it a simpler payroll setup than a Section 125 pre-tax election even though both ultimately reduce taxable wages.

Does an EBHRA Have to Be Offered to Every Employee the Same Way?

An EBHRA must be uniformly available to all similarly situated individuals, a nondiscrimination standard that allows an employer to draw reasonable classifications, such as full-time versus part-time or different work locations, but does not allow the employer to favor highly compensated employees within the same class. An employer can offer different EBHRA amounts to different bona fide employee classes, following a structure similar to the class-based design covered in our ICHRA guide, as long as the same amount applies to every similarly situated employee inside a given class.

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Frequently Asked Questions

Sources

This article cites data and rules from the Internal Revenue Service (Revenue Procedure 2025-19), the Department of Labor, the Department of Health and Human Services, and the Treasury Department's 2019 final regulations establishing the Excepted Benefit HRA category, and federal COBRA continuation coverage requirements.