Health Reimbursement Arrangement (HRA) Plan Documents

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Employers Can Substantially Lower Group Health Premium with a Core HRA

$299 one-time fee in PDF via email*

$349 one-time fee in PDF email* + Deluxe Binder via USPS

HRA Plans for 2+ employee groups are used to reimburse medical, dental, vision, and specific insurance premium expenses to employees tax-free.

Deductible Gap HRA. Employers can reduce group health premium cost by utilizing a lower cost plan with higher deductibles or extra co-payments. The employer then uses some of the premium savings to self-insure the employee from extra deductible or co-payment expense.  If no one has a deductible expense employers save even more.

Comprehensive Integrated HRA. Employers can also integrate an HRA with their group health insurance plan to pay deductibles, co-payments and/or co-insurance, and to make additional medical, dental, and vision benefits available tax-free benefits.

Limited HRA. Employers can also design an HRA Plan to just reimburse specific dental and vision expenses, specific types of insurance premium, or retirement benefits.

The new Qualified Small Employer HRA (QSE-HRA) can reimburse non-group health insurance premium and out of pocket medical, dental, and vision benefits. The QSE-HRA is discounted to only $199 for a limited time. Related: QSEHRA: The Stand-Alone HRA Returns

The IRS and DOL only require employers to adopt a formal plan document and SPD to define the benefit design in writing. Then you start saving money.

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Core Documents will notify you when there are sufficient changes in the Code to require amending and restating your Plan.  You can amend and update anytime for just $199, and only when necessary which is the most cost effective way to establish and maintain a HRA Plan.

*Most complete document orders placed by 3 PM will be emailed out the same day Monday through Friday. Orders placed on weekends are emailed out Monday morning. Keep in mind that December, January, and February are our busiest months of the year and documents are processed in the order they are received. The Rush Order fee ($25) simply brings your document to the top of the stack to be processed immediately.

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PDF Brochure Core HRA Plan Document & Forms for 2+ employee groups

Core HRA Plan Document and Forms Brochure

Core Documents Offers Many Plan Document Design Options

Health Reimbursement Arrangements, better known as HRA Plans, have been used for years by insurance agents and benefit plan designers. They were known by a multitude of names as there were a multitude of plan design options: Medical Expense Reimbursement Plans (MERPs), personal savings accounts, personal care accounts, defined contribution plans, consumer-driven health care plans, Section 105 Plans, and numerous other proprietary name-brand 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. These new guidelines simplified the myriad of names to one.

Related: QSEHRA: The Stand-Alone HRA Returns

Related:  Small Employer HRA Update & FAQs (QSEHRA)

Related: Small Business HRA Relief becomes law – Core Documents offers package for $199

How Employers Utilize an HRA Plan

A common way that employers utilize an HRA Plan is to cover expenses that are not reimbursed by group health insurance. Another common use of an HRA is in conjunction with a group High-Deductible Health Coverage (HDHC) plan.

With an HRA plan in place, the employer can fund an account that reimburses the employee 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 by an HRA Plan, depending on the plan limits set by the employer. Reimbursements that come from the HRA are not taxed to the employee and have the added benefit of being tax-deductible for the employer. In this manner, both the employer and employee benefit; the employer in reduced insurance costs and the employee in a better benefits package.

HRA Plan Design Flexibility

HRAs provide employers with a lot of flexibility in plan design. Limits can be set on the types of services reimbursed, the way amounts are contributed to the HRA (either lump-sum or incremental), and on whether or not funds can be rolled over from year to year. The decision of carrying over or forfeiting all or a portion of the unused HRA funds lies with the employer, depending on the limits they set in the plan design. This is in contrast to a Section 125 Medical FSA, where the employer can be liable for the full amount starting on the first day of the plan.

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, employees may: 1) request reimbursement for medical expenses at the time the services are rendered, 2) accumulate them for reimbursement in the future, or 3) save the funds for retiree health benefits. In this manner, HRA accounts can pay the same expenses as a Section 125 Medical FSA (flexible spending account), but unlike a FSA only employers can contribute to the HRA.

Who Can Establish and Participate in an HRA Plan?

Sole proprietors, partnerships, regular corporations, S corporations, limited liability companies (LLCs), professional corporations, and 501(c)3 non-profits are all allowed to establish an HRA Plan for the benefit of their employees. Generally, however, the owners said entities cannot personally participate in an HRA. This includes sole proprietors, partnerships, and LLCs, although special exceptions are made for owners of C corporations.

Benefits of a Health Reimbursement Arrangement (HRA)

 1)  Control. HRAs allow the employer to retain control of funds and decide what types of expenses will be reimbursed, in addition to whether the HRA funds will carry over from year to year. By adding a high-deductible insurance plan to the HRA Plan, the employer can cut the cost of providing health care benefits to his employees.

2) Financial Flexibility. HRAs don’t require pre-funding, as the employer can simply reimburse plan members for eligible expenses as they occur. As a result, the company’s assets are freed up for other uses.

3) Savings. Reimbursements deployed through an HRA are tax-deductible for the employer and tax-exempt for employees. This means that everyone enjoys a tax advantage and lower premiums when an employer selects an HRA.

4) Choice. There are no restrictions on the type of health plan that can be paired with an HRA, so employers are free to choose the perfect plan for their employees. In addition, employees get to decide where and when to spend the HRA funds, as they are allowed to choose health care providers and better prices.

Core Document’s HRA Plan Document Package

3D_0004_hraCore Documents is glad to offer employers a professional, personalized, and cost-effective HRA Plan Document Package. This package includes the following components:

1)  HRA Plan Document. Plan Documents are personally prepared and emailed to each client. The Basic PDF version is just $299, but one can upgrade to the Deluxe PDF & Printed version for an additional $50 ($349). The Deluxe version includes a printed 3-ring binder edition plus the Basic PDF version, and is shipped via Priority Mail. Upon arrival, the Plan Document should be accepted and signed by the owner or officer of the company. The Plan Document should also be kept on file for review by employees, accountants, the IRS, and other important persons.

2) HRA Summary Plan Description (SPD). The Summary Plan Description is required for each employee. It explains the Plan Purpose, Eligibility, Enrollment, and other important information in accessible language. The SPD also includes all information required by the IRS, DOL, FMLA, and COBRA regarding Plan Year start and end dates, legal service agents, and federal I.D. numbers.

3) HRA Election and Claim Form. This document is personalized for the business and will include the Election and Claim Form that is necessary to submit bills for reimbursement by the company.

4) HRA Administrative Handbook. This invaluable handbook includes sections on Administration, Nondiscrimination Testing, and Reporting and Disclosure. The client will be provided with instructions regarding plan setup, maintenance procedures, and other important steps.

5) Resolution to Adopt a Section 105 Plan. This document includes the Minutes of the Meeting to Adopt the Section 105 Plan as an employee benefit and reference.

4 Popular HRA Plan Design Options

After years of working with clients, Core Documents has found these four to be the most popular:

1) Deductible Gap HRA Plan – PDF Format – $299 one-time setup fee

The Deductible Gap HRA Plan is designed to be combined with a high-deductible health insurance plan and will only pay for items covered by the group insurance policy that it goes with. For example, the employer buys a high-deductible insurance plan – in this example, a $2500 annual deductible at a considerable savings – but the employees are used to paying only a $500 annual deductible. This is where the Deductible Gap HRA Plan comes in, as it allows employees to continue paying only $500 in annual deductibles while likewise increasing the amount of deductible expenses that are covered for the employer. In the example used above, an employer’s deductible expense coverage would range anywhere from $501-$2000 under the Deductible Gap HRA Plan, while still holding the employee’s rate at $500. Keep in mind, however, that only employees who actually experienced a deductible in excess of their normal $500 would receive HRA proceeds. With this plan, both the employer and employee benefit from reduced insurance costs.  See HRA Group Premium Savings Calculator..

2)  Comprehensive HRA Plan – PDF Format – $299 one-time setup fee

The Comprehensive HRA Plan is a viable option if combined with an employer-sponsored group health plan (including employees participating in a spouse group health plan). It can be used to reimburse most 213(d) medically-necessary out-of-pocket expenses, including excepted benefit insurance premium expenses. Through this HRA plan design, employers may provide employees with a set amount of dollars every year or every month to spend on allowed expenses. Unused HRA account balances can be rolled over from one Plan Year to the next, so funds can accumulate over the lifespan of the plan. Employees who are not enrolled in an eligible employer-sponsored group health plan can still use the Comprehensive HRA Plan for dental, vision, and excepted benefit insurance premium expenses.

3) Limited HRA Plan – PDF Format – $299 one-time setup fee

A Limited HRA Plan design is very versatile as design options are unlimited. Employers who find ways to reduce premium by adding extra deductibles or co-payments can establish an HRA to pay those expenses (if they occur), and by doing so save money on their group insurance plan. This plan essentially allows employers to cut premiums and insure the difference themselves via a Limited HRA Plan. Limited HRA Plans can also be restricted to just one type of medical expense, like prescription drugs, dental, vision, or other types of insurance.

4) Premium Reimbursement Arrangement (PRA) Plans – PDF Format – $299 one-time setup fee

The PRA Plan allows employers to reimburse insurance premiums, including dental insurance, vision insurance, ancillary insurance, certain cancer and indemnity plans, and long-term care insurance – essentially most group policies and excepted benefits.

Related: QSEHRA: The Stand-Alone HRA Returns

Related:  Small Employer HRA Update & FAQs (QSEHRA)

Related: Small Business HRA Relief becomes law – Core Documents offers package for $199

  • For additional information, please see the following two links:

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 subject to the certain conditions.

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. 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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HRA Resources

(IRS Notice 2013-54) — Application of Market Reform and other Provisions of the Affordable Care Act to HRAs, Health FSAs, and Certain othe r Employer Healthcare Arrangements

IRS Notice 2013-54 (HRA Plans) — Part III – Administrative, Procedural, and Miscellaneous:Health Reimbursement Arrangements

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