$299 Health Reimbursement Arrangement -HRA Plans Offer Employers Endless Cost- Saving Design Options Listed Below

Recent 2013 HRA Blog Topics:

HRA Requirements and Healthcare Reform

HRA & FSA Summary of Benefits and Coverage (SBC) SBC Sample by Core Documents, Inc.

Can An Employer Reimburse Individual Health Insurance through a Section 125 or HRA Plan?

Health Reimbursement Arrangements, better know as HRA Plans, have been used for years by insurance agents and benefit plan designers, however there were as many different names for these HRA plans as there were HRA plan design options. Many referred to them as medical expense reimbursement plans or MERPs, personal savings accounts, personal care accounts, defined contribution plans, or consumer-driven health care plans, Section 105 Plans, and numerous other confusing name brand product options.

The confusion ended in 2002 when the IRS issued new guidelines in IRS Notice 2002-45 and IRS Revenue Ruling 2002-41 for employer-provided medical reimbursement accounts and called it the Health Reimbursement Arrangement, or HRA. Thes new HRA Plans can reimburse medical, dental, vision and individual insurance premium expenses to employees tax-free.

There are endless cost-saving HRA plan design options for employers to consider, here are four of the most popular:

Deductible Gap HRA Plan – $299 one-time setup fee
The Deductible Gap HRA plan is designed to be coupled with a High Deductible Health Insurance Plan and will pay for only items covered by the insurance policy it compliments. The employer buys a large deductible insurance plan, say $2,500 annual deductible at a considerable savings, however the employees are used to only paying a $500 annual deductible. The Deductible Gap HRA is designed by the employer so the employees pay their normal $500 annual deduction and the new HRA Plan will pay deductible expenses from $501 to $2,500, or up to $2,000 only to employees who actually experience a deductible in excess of their normal $500. 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 Flexible Spending Arrangement / HRA Plan – $299 one-time setup fee
The Comprehensive Flexible Spending Arrangement / HRA can cover any out-of-pocket medical, dental, vision, insurance premium expense, co-pays, and deductibles. The Comprehensive Plan may or may not be coupled with a high deductible health coverage or limited-benefit medical plan. Through this HRA plan design employers normally elect to give employees a set amount of dollars every month to spend as each employee decides. Some employees may choose to spend the money on dental benefits, another spends theirs on an individual insurance policy, and another employee may let theirs accumulate* for a future accident or illness.  *subject to FSA annual limits.

Limited HRA Plan – $299 one-time setup fee
A Limited HRA plan design is very versatile. Let’s say you learned you could save a substantial amount of money by adding a $1,000 hospital copayment to your group plan. Then simply design an HRA that will pay that $1,000 if any employee actually needs to go into the hospital. Design options for Limited HRA Plans are unlimited. Employers who find ways to reduce premium by adding extra deuctibles or copayments can simply establish an HRA to pay those expenses, if they occurr. Find a way to cut premium and insure the difference yourself. Other designs include a singular benefit for prescription drugs, dental, vision etc. Limited HRA plans 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).

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