|
$299 Health Reimbursement
Arrangement -
HRA Plan Document Design Options |
|
HRAs
have been referred to by many names over the last
few years such as personal savings accounts, personal
care accounts, defined contribution plans, or
consumer-driven health care plans.
The confusion ended in 2002,
when the IRS finally issued guidelines in Notice
2002-45 and Revenue
Ruling 2002-41 for employer-provided medical
reimbursement accounts and called it the Health
Reimbursement Arrangement, or HRA.
There
are numerous HRA plan design issues employers
may wish to consider:
Deductible Gap HRA
Plan - $299 one-time setup fee
The Deductible Gap HRA plan is designed to be
coupled with a High Deductible Health Coverage
and will pay for only items covered by the insurance
policy it compliments. The employer benefits from
reduced insurance costs, but the effect to the
employee is cushioned with the Deductible Gap
HRA. Click the following link to download Core's
new HRA
Group Premium Savings Calculator.
Comprehensive
HRA Plan - $299 one-time setup fee
The Comprehensive HRA can cover any out-of-pocket
medical expense that include but are not limited
to dental expenses, vision expenses, co-pays,
deductibles, medical expenses and health insurance
premiums. The Comprehensive Plan may or may not
be coupled with a high deductible health coverage
or limited-benefit medical plan.
Limited
HRA Plan - $299 one-time setup fee
A Limited HRA will cover only specified out-of-pocket
medical expenses such as prescriptions, dental,
vision etc. and can be restricted to cover just
one medical expense.
Premium
Reimbursement Arrangement (PRA) Plan - $299 one-time
setup fee
The PRA allows employers to reimburse only health
insurance premiums including group sponsored insurance
plans as well as individual health insurance policies
outside the group, or long-term care insurance.

$299
HRA Plan Document Package Includes:
HRA
Plan Document - Plan Documents
are personally prepared for each client in a one
inch notebook. Document should be accepted and
signed by an Owner or Officer of the Company and
kept on file for review by employees, accountants,
IRS, etc.
HRA
Summary Plan Description (SPD)
- Required for each employee. Explains the Plan
Purpose, Who is Eligible, How To Enroll, etc.
in easy to read language. Also includes all information
required by the Internal Revenue regarding the
Plan Year Start and End Dates, Agent for Legal
Service, Fed. ID#, and information regarding COBRA,
FMLA, and required DOL information.
HRA
Election and Claim Form - Personalized
for the Company it will include the Election Agreement
and Claim Form to submit bills for reimbursement
by the Company.
HRA
Administrative Handbook - Includes
sections on: Administration, Non-Discrimination
Testing, and Reporting and Disclosure information.
You will be provided with instructions regarding
Plan setup, maintenance procedures, etc.
Resolution to Adopt
a Section 105 Plan- Includes minutes
of the meeting to adopt the Section 105 Plan as
an employee benefit.

Why Employers Shop
For HSA Plans and Buy HRA Plans
Core Documents recently sent out a press release
entitled "Why
Employers Shop For HSA Plans and Buy HRA Plans"
(click the link to see the article) which discusses
the difference between HSAs and HRA plans and
why the number of HRA participants in the U.S.
have outpaced HSA enrollments.
How Employers Utilize
a Health Reimbursement Arrangement (HRA)
Expenses not reimbursed by health insurance are one
way employer groups are utilizing HRAs. With an HRA,
the employer funds an account from which the employee
is reimbursed for qualified medical expenses, such as
co-pays, deductibles, vision care, prescriptions, long-term
care, medical insurance, chiropractic care, and most
dental expenses. Over-the-counter drugs that are medically
necessary may also be reimbursed through an HRA. Reimbursements
from the HRA are not taxed to the employee, and are
deductible by the employer.
The most common use of an HRA is in
combination with a High Deductible Health Coverage (HDHC)
Plan. HRAs can enhance a company's benefit package while
helping to contain costs and boost employee morale.
For example, you can combine your HRA with a higher-deductible
health insurance plan. The employer benefits from reduced
insurance costs, but the effect to the employee is cushioned
with an HRA.
HRA Plan
Design Flexibility
HRAs provide employers with a lot of flexibility in
Plan design. Limits can be set on types of services
reimbursed by an HRA. Amounts contributed to an HRA
can be in a lump sum or in increments throughout the
year. This is in contrast to a Section 125 Medical FSA
where the employer can be liable for the full amount
on the first day of the plan. You can also choose to
carry over unused HRA funds to the next plan year, or
have all or a portion of the unused HRA funds forfeited
at the end of the year.
HRA accounts can pay the same expenses
as a Section 125 Medical Reimbursement Flexible Spending
Account (FSA), however, unlike an FSA only employers
can contribute to the HRA.
In contrast to the "use-it-or-lose-it"
rule of cafeteria plans, the employee gets to carry
forward any unused HRA account funds. Depending on the
HRA design options elected by the employer, their employees
may request reimbursement for medical expenses at the
time services are rendered, accumulate them for reimbursement
in the future, or save the funds in the HRA for retiree
health benefits.
Who Can
Establish an HRA Plan
Sole Proprietors, partnerships, regular corporations,
S corporations, limited liability companies (LLCs),
professional corporations, and 501(c)3 not-for-profits
can establish an HRA plan for the benefit of their
employees.
Who
Can Participate in an HRA Plan
Generally owners can not personally participate
in an HRA. This includes sole proprietors, partnerships,
and LLCs (depending on how the LLC is taxed).
However, owners of C corporations can participate
in an HRA and individuals who own more than 2%
of an S corporation can participate subject to
the certain conditions outlined at www.CoreDocuments.com/irsheadliner163.php.
Benefits
of a Health Reimbursement Arrangement (HRA)
HRA Advantages to
Employers and Employees
Control.
HRAs allow you as an employer to retain control
of funds and decide what type of expenses will
be reimbursed, and also whether the HRA funds
will carry over from year to year. By adding a
higher-deductible insurance plan with your HRA
plan you can cut the cost of providing healthcare
benefits to your employees.
HRA
Financial Flexibility. HRAs don't
require prefunding; you may simply reimburse plan
members for eligible expenses as they occur. As
a result, your organization's assets are freed
up for other uses.
Savings
with an HRA. Reimbursements through
an HRA are tax deductible for you as the employer
and tax exempt for your employees. That means
everyone experiences a tax advantage when you
select an HRA. Employers and employees also enjoy
the lower premiums that go with high-deductible
health plans.
Choice
with HRAs. There are no restrictions
on the type of health plan that can be paired
with an HRA, so you are free to choose the perfect
plan for your employees. Also, employees get to
decide where and when to spend the HRA funds.
They are free to choose healthcare providers and
shop for better prices.
How
To Start an HRA Plan. Simply click
on the secure "Online HRA Order Form"
or open and print the "Fax HRA Order Form"
and fax or mail it to Core Documents. You can
start your HRA at any time. One of our consultants
will contact you regarding design and setup options
and administrative decisions.

Important
HRA Facts
HRA
Carryover Provisions. HRAs with
a carryover feature can be offered on a tax-favored
basis if the following conditions are satisfied:
-
The HRAs must be funded solely
with employer contributions;
-
If high deductible health
coverage is coupled with the HRA, the employee
portion of the premium (i.e. family coverage
premium) can be paid with pre-tax-salary deductions,
however, in no event can the HRA itself be
funded with pre-tax salary deductions or through
a cafeteria plan;
-
The HRA can only reimburse
substantiated medical care expenses incurred
by employees and their spouses and dependents;
and
- Unused portions cannot be cashed out, though
terminated employees can spend down their HRA
balances after they terminate.
HRAs
are Health FSAs with subtle differences.
Many health FSA rules do not apply to HRAs, for
example, unlike an FSA, HRAs can reimburse insurance
premiums. Also, the HRA period of coverage is
not required to be 12 months, like an FSA. And,
the FSA rule limiting reimbursement to expenses
incurred during the current period of coverage
does not apply. This means expenses incurred during
the current year can be reimbursed in the subsequent
year so long as the individual was a participant
when the expense was incurred.
HRAs
Can Be Designed To Pay Last, After The Health
FSA. Normally the health FSA must
be the payer of last resort. Thus if an employee
participates in both the HRA and a health FSA
and they both cover the same expenses, the employee
would first look to the HRA for payment increasing
the likelihood the employee might have to forfeit
unused health FSA funds. The good news is the
IRS has authorized employers to design HRAs to
require the health FSA to pay first, which will
reduce health FSA forfeitures under the use-it-or-lose-it
rule.
COBRA
and HRAs. HRAs are generally subject
to COBRA continuation coverage requirements unless
the small employer exemption applies.
Nondiscrimination
Rules and HRAs. HRAs can not discriminate
in favor of highly compensated employees.
Prohibition
on mid-year HRA changes does not apply.
The 12-month period of coverage and prohibition
of mid year changes does not apply to an HRA.
Is
a HRA Trust Account Required?
No, not by the Code, but possibly by ERISA (no
trust is required if HRA reimbursements are made
directly out of the general assets of the employer.
Are
HRA Account Earnings Taxable?
This is not applicable if reimbursements are made
directly out of the general assets of the employer.
If the HRA is funded by a Voluntary Employee Beneficiary
Association (VEBA) trust account, earnings are
generally not taxable.
Form
5500 Reporting Requirement. Employer
HRA groups that cover more than 100 participants
must file an IRS Form 5500 within seven months
of the end of the plan year.
HRA
Plan Document Required. The Code
requires that the HRA plan be in writing and that
every participant receives a Summary Plan Description,
(SPD).


|