ComplyDIY · BenefitLab

At-a-Glance What this is, who it affects, when it's due, and the risk.−

What A capped, employer-funded HRA that reimburses excepted benefits (dental/vision premiums and expenses), COBRA premiums, and STLDI premiums. It cannot reimburse individual major medical premiums or group plan premiums other than COBRA. The annual cap is $2,200 per employee for 2026, rising to $2,250 for 2027.

Who Employers that offer a traditional group health plan to the same employees. Employees do not have to enroll in that plan to be eligible for the EBHRA.

When Adopt the plan before the plan year begins; enroll eligible employees at hire/eligibility and during annual enrollment.

Risk Exceeding the annual cap ($2,200 for 2026; $2,250 for 2027), reimbursing ineligible expenses (especially individual major medical premiums), or failing to offer a qualifying group health plan to the same employees can all trigger IRC Section 4980D excise tax at $100 per day per affected individual.

Deadlines & Frequency Key timing checkpoints to stay compliant.+

Before

Plan year start

Adopt or refresh the EBHRA plan document and SPD before the plan year begins.

$2,250

2027 annual cap (2026: $2,200)

Confirm the annual allowance does not exceed the statutory limit; a monthly amount is easier to administer.

Monthly

Substantiation

Collect receipts or invoices and reimburse only excepted-benefit expenses up to the remaining allowance.

Trigger	Due Date / Window	Notes
Adopt/refresh EBHRA plan document + SPD (and wrap if used)	Before plan year	Define eligibility, the annual cap ($2,200 for 2026, $2,250 for 2027), reimbursable categories, substantiation process, and run-out or carryover rules.
Annual allowance set and communicated	At plan year start	Confirm the annual cap does not exceed the statutory limit; convert to a monthly amount for administrative ease.
Substantiation and reimbursements	Ongoing (monthly is most common)	Collect receipts or invoices; reimburse only excepted-benefit expenses up to the remaining allowance.

Trigger: Adopt/refresh EBHRA plan document + SPD

Window: Before plan year

Notes: Define eligibility, the cap ($2,200 for 2026; $2,250 for 2027), reimbursable categories, substantiation, and run-out or carryover rules.

Trigger: Annual allowance set and communicated

Window: At plan year start

Notes: Confirm the cap is within the statutory limit; a monthly amount is easier to administer.

Trigger: Substantiation and reimbursements

Window: Ongoing (monthly is most common)

Notes: Reimburse only excepted-benefit expenses up to the remaining allowance.

What You Need: Docs & Data The plan document is the heavy lift; gather these before the plan year.+

EBHRA Plan Document: eligibility, annual cap (within the limit: $2,200 for 2026, $2,250 for 2027), reimbursable expense categories, substantiation process, run-out or carryover rules, and coordination with other coverage.
SPD (or Wrap SPD inclusion): and distribution proof.
Allowance ledger: tracking each employee's annual cap usage by month.
Substantiation records: invoices, receipts, or EOBs for each reimbursement; COBRA election notices or STLDI invoices if those premiums are reimbursed.

How To Do It: Step-by-Step Substantiation is simple; the guardrails on what's reimbursable need care.+

1

Confirm the group plan eligibility requirementVerify you offer a traditional group health plan to the same employees who will receive the EBHRA. Employees don't have to enroll, but the offer must exist.

2

Draft and adopt the plan documentSet the annual cap at or below the limit ($2,200 for 2026, $2,250 for 2027) with a clear list of allowed reimbursements: excepted benefits, COBRA premiums, and STLDI premiums.

3

Set up a monthly claims processEmployees submit a receipt or invoice; you confirm it falls within the allowed categories and the remaining annual balance; then reimburse.

4

Communicate clearly to employeesMake clear the EBHRA cannot be used for individual major medical premiums. This is the most common source of improper claims.

5

Track annual balances and any permitted carryoverApply carryover per plan rules and document the year-end balance for each employee.

Delivery Rules What's reimbursable, what's not, and how payments are made.+

Eligible reimbursements: Excepted-benefit dental and vision premiums and expenses; COBRA continuation premiums; STLDI premiums (subject to state availability, see Special Cases). See the Templates & Resources section below for a full list of qualifying excepted benefits.
Not eligible: Individual major medical premiums or group health plan premiums (other than COBRA). Reimbursing these disqualifies the arrangement as an EBHRA.
Payment method: Employee pays the provider or premium, submits documentation, and is reimbursed. Monthly processing keeps administration manageable.
Tax treatment: Properly substantiated EBHRA reimbursements are tax-free under IRC Sections 105 and 106.
Employee communications: Make clear in plan documents and enrollment materials that the EBHRA is a separate, capped arrangement distinct from the group health plan.

Proof & Recordkeeping If it isn't documented, it didn't happen; save these items.+

Plan document, SPD/wrap, and amendmentsKeep all versions plus distribution logs.
Allowance ledger and reimbursement logsAnnual allowance ledger per employee and monthly logs tracking cap usage.
Substantiation for each reimbursementReceipts, invoices, or EOBs confirming the expense is an eligible excepted benefit.
COBRA / STLDI documentationCOBRA election notices or STLDI invoices for any premium reimbursements of that type.

Common Traps & FAQs Quick answers and pitfalls we see most often.+

Do employees have to enroll in our group health plan to use the EBHRA?

No, they just need to be offered the plan. An employee who waives the group plan can still participate in the EBHRA.

Can EBHRA reimburse individual Exchange plan premiums?

No. Reimbursing individual major medical premiums is not permitted under EBHRA and disqualifies the arrangement. For that, look at the ICHRA or QSEHRA.

Can EBHRA and HSA contributions coexist?

Yes, if you limit the EBHRA to dental and vision expenses only. Designing the EBHRA to reimburse first-dollar general medical expenses will disqualify employees from making HSA contributions.

Is carryover allowed?

Yes, if your plan document allows it. Carryover amounts count toward the following year's cap; they don't stack on top of it. Track them separately in your allowance ledger.

How is EBHRA different from ICHRA or QSEHRA?

EBHRA is designed to supplement a group health plan, not replace it. It can only reimburse excepted benefits, not individual major medical premiums. ICHRA and QSEHRA are designed to reimburse individual health insurance premiums and serve as an alternative to a group plan.

Official Guidance & Links Primary sources for EBHRA rules, eligible expenses, and limits.+

Special Cases & State Variations Design and workforce scenarios that change how the rules apply.+

STLDI availability varies by state: Short-term limited duration insurance rules are in active flux at the federal level. As of August 2025, the federal agencies announced they are reconsidering the STLDI definition and will not prioritize enforcement of current rules. States are applying their own definitions. Before listing STLDI premiums as reimbursable, confirm that compliant STLDI products are actually available to your employees in their states.
HSA populations: For employees enrolled in an HDHP who contribute to an HSA, limit the EBHRA to dental and vision expenses only. First-dollar general medical reimbursements disqualify HSA contributions.
Union or retiree groups: Coordinate EBHRA design with any collective bargaining agreements or retiree medical plan provisions before finalizing the plan document.

Templates & Resources A reference guide to qualifying excepted benefits and a substantiation checklist.+

There is no federal model notice for EBHRA; the plan document is your primary compliance document. Here's a reference guide to what qualifies as an excepted benefit and a checklist for monthly substantiation.

Where a TPA or benefits attorney helps: Drafting the plan document and SPD, confirming that your list of reimbursable expenses stays within the excepted-benefit category, and setting up a clean claims workflow. The plan document is not complex compared to a full group health plan, but getting the reimbursable-expense list wrong is the most common EBHRA compliance failure.

What qualifies as an excepted benefit, reference guide: EBHRA can only reimburse expenses in these categories. If an expense doesn't appear here, don't reimburse it.

Expense Category	Examples	Notes
Dental coverage premiums and expenses	Stand-alone dental plan premiums; out-of-pocket dental costs (exams, cleanings, fillings, orthodontia)	Must be a separate dental policy or expense, not embedded in a major medical plan
Vision coverage premiums and expenses	Stand-alone vision plan premiums; exams, glasses, contact lenses	Same rule: must be separate from a major medical plan
COBRA continuation premiums	COBRA premiums for the employer's own group plan, or another employer's group plan	One of the more common EBHRA use cases; keep the COBRA election notice on file
Short-term limited duration insurance (STLDI) premiums	Premiums for a compliant STLDI policy	Availability varies by state; federal rules are in flux as of 2025. Confirm products are available and compliant in your employees' states before including this category
Not eligible: Individual major medical premiums; group health plan premiums (other than COBRA)	Exchange plans, off-Exchange individual plans, ACA-compliant group plan premiums for a different employer's active plan	Reimbursing these disqualifies the EBHRA and triggers Section 4980D excise tax exposure

Monthly substantiation, what to collect before reimbursing:

Document	When to Collect	What It Verifies
Premium invoice or carrier statement (dental, vision, COBRA, or STLDI)	Each month, or annually if the premium is fixed	Confirms the premium amount and coverage type for the reimbursement period
Itemized receipt or EOB (for out-of-pocket dental or vision expenses)	At time of claim submission	Must show date of service, provider, and amount; confirms the expense is an excepted benefit
COBRA election notice (for COBRA premium reimbursements)	Once, at the time COBRA is elected	Confirms the employee is a COBRA qualified beneficiary paying eligible continuation premiums
Reimbursement log (employee name, expense category, amount claimed, amount approved, date paid, running annual balance)	Maintained monthly by the employer or TPA	Your audit trail; confirms expenses are within the allowed categories and the annual cap ($2,200 for 2026; $2,250 for 2027)