Part I of Notice 2002–45, 2002–2 C.B.

93, describes the tax treatment of health reimbursement arrangements (HRAs). The notice explains that a tax-favored HRA is an arrangement that is paid for solely by the employer and not pursuant to a salary reduction election or otherwise under a § 125 cafeteria plan, reimburses the employee for medical care expenses (as defined in § 213(d)) incurred by the employee and by the employee’s spouse and dependents, and provides reimbursements up to a maximum dollar amount with any unused portion of that amount at the end

of the coverage period carried forward to subsequent coverage periods.