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How to Save on Group Health Premiums — Deductible Gap HRA — Video

01:00 Minute Executive Summary:

One of the best things about the Health Reimbursement Arrangement Plan is all the options available to the employer. While it’s great that all those choices make the HRA as flexible as you need it to be, it can feel a little overwhelming when you first hear about it. That doesn’t mean it is hard to design a plan, though. In fact, you’ll find that working with Core Documents to craft a Deductible Gap HRA Plan just right for you makes it easy as pie.

To help sum it all up, Core Documents has produced a short video on the Deductible Gap HRA Plan. It’s only one minute and eight seconds long and yet it clearly explains the basic concepts of the plan perfectly. Once you’ve got those basics from the video, you can read further about this versatile employee benefit in the article below.

Ready to order? Click here!

Deductible Gap HRA Plan

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 goes with it.

For example, the employer buys a high-deductible insurance plan – in the video example, the plan has a $2500 annual deductible at considerable savings – but 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 our example, the employer’s deductible expense coverage will range anywhere from $501-$2000 per employee 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.

Also, both the employer and employee benefit from reduced insurance costs.

See HRA Group Premium Savings Calculator.

Who Can Establish a Deductible Gap 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 a Deductible Gap HRA Plan for the benefit of their employees.

However, the owners of said entities cannot personally participate in the Plan. This includes sole proprietors, partnerships, and LLCs, although special exceptions are made for owners of C corporations.


Benefits of a Health Reimbursement Arrangement

An HRA Plan has several advantages over the Flexible Spending Account (FSA) that is a part of most Section 125 benefit plans. Here are just a few of those perks:

1) Control. The HRA allows the employer to retain control of funds. This means deciding the types of expenses that will be reimbursed and whether HRA funds will carry over from year to year.

2) Financial Flexibility. In contrast to an FSA, the Health Reimbursement Arrangement does not require pre-funding. Employers reimburse plan members for eligible expenses as they occur. As a result, the company’s assets are freed up for other uses.

3) Tax Savings. Reimbursements made through an HRA are tax-deductible for the employer and tax-exempt for employees. This means everyone enjoys a tax advantage and lower overall costs when an employer selects an HRA.

4) Choice. With no restrictions on the type of health plan that can be paired with an Health Reimbursement Arrangement, employers are free to choose the perfect plan for their employees. Plus, employees get to decide where and when to spend the HRA funds and, depending on the HRA design options elected by the employer, employees may:

  • Request reimbursement for medical expenses at the time the services are rendered;
  • Accumulate expenses for reimbursement in the future; or,
  • Save the funds for retiree health benefits.

HRA Carryover Provisions

HRA Plans with a carryover feature can only be offered on a tax-favored basis if the following conditions are met:

  • Is funded solely with employer contributions; and,
  • Only reimburses substantiated medical care expenses incurred by employees and their spouses and dependents.

It is also important to know that:

  • While no employee dollars may fund the HRA Plan, employees can pay a portion of the premium for an employer-sponsored high-deductible group health insurance plan offered with the HRA.
  • Unused portions of an HRA account may be carried over but cannot be cashed out (though terminated employees can spend down their HRA balances after they terminate).

Frequently Asked Questions on HRA Plans

  • Is an HRA subject to COBRA rules? HRAs are generally subject to COBRA continuation coverage requirements unless the small employer exemption applies.
  • Do non-discrimination rules apply? Yes. HRAs can not discriminate in favor of highly compensated employees.
  • Can changes be made before the end of an HRA Plan year? Yes. 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. Also, if the HRA is funded by a Voluntary Employee Beneficiary Association (VEBA) trust account, earnings are generally not taxable.
  • Does Form 5500 reporting apply? 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.
  • Is an HRA Plan Document Required? Yes. The Code requires that the HRA plan be in writing and that every participant receives a Summary Plan Description, (SPD).

HRA Plan Document Package Just $299

A deductible gap HRA plan saves employers by allowing use of an HDHP group health plan.Core Documents is glad to offer a professional, personalized, and cost-effective Deductible Gap HRA Plan Document Package. Our package includes the following:

1) HRA Plan Document. Plan Documents are personally prepared and emailed to each client. 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.

  • The Basic PDF version is just $299.
  • A printed Deluxe version with 3-ring binder is just $50 more (ships via Priority Mail).

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.

Ready to Order? The HRA Plan Documents Package from Core Documents has all you need to establish your Deductible Gap Health Reimbursement Arrangement. The cost is a one-time fee of $299 with no required renewals or annual subscriptions. You can order the package online or by fax. Just click on a button for the form that best suits you:

Order Section 105 HRA Plan Documents from Core Documents today! Download our fax order form to order your Section 105 HRA Plan documents today!

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