Employers can substantially lower Group Health Premium with a Core HRA plan document package

Health Reimbursement Arrangements are medical reimbursement plans that give employers more control over the costs and benefits of employee health coverage. Reimbursements made to employees through an HRA are tax-deductible to the employer and tax-exempt for the employee. Employers can get started today with a Core HRA plan document package.


Core Documents HRA Plan Document Package

$199 one-time fee in PDF via email*

$249 one-time fee in PDF email* + Deluxe Binder via USPS

HRA Plans for employees reimburse medical, dental, vision, and specific insurance premium expenses to employees tax-free.

With nearly endless options, an employer can customize the Core HRA plan document that best serves their group health plan.

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

 

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Everything an employer needs to know

Learn all about Health Reimbursement Arrangements by scrolling through the article, or go directly to one of these sections:

Introduction

HRA Plan Flexibility

Popular plan designs (Integrated and Stand-alone)

General rules for HRA plans

More resources

Small employers with no group health plan can provide a QSE-HRA to help employees obtain health insurance.

Small employers with no group health plan can provide a QSE-HRA to reimburse employees who obtain their own health insurance.


Introduction

The Health Reimbursement Arrangement (HRA) is a medical expense reimbursement plan funded by an employer for its employees. Reimbursements through an HRA are tax-deductible for the company and tax-exempt for employees.

HRAs have been popular with employers for decades. All of the costs were tax-deductible for employers and all of the rules and plan options were decided by employers.

And, there was no interference from the government until 2002, when the IRS issued formal guidance in Notice 2002-45.

The Notice defined the HRA, in part, as an employer-provided arrangement which:

  • Is paid for solely by the employer
  • Is excluded from the employee’s gross income (tax-exempt),
  • Reimburses the employee and dependents for medical care expenses,
  • May only provide benefits that reimburse expenses for medical care as defined in § 213(d),
  • Requires substantiation of each medical care expense submitted for reimbursement,
  • Provides reimbursements up to a maximum dollar amount for a coverage period,
  • Allows that unused balances at the end of the year may be carried into the following year,
  • Is subject to HIPAA privacy and COBRA continuation rules,
  • Must be established with a written plan document and a copy of the plan document’s Summary Plan Description given to every eligible participant.

New ACA rules

When the Affordable Care Act arrived, HRAs took a hit. Popular plans that employers had long used to reimburse employees who bought their own health insurance were disallowed by the new law, and HRAs with a group health plan could only offer plans that carry all the new ACA-required essential health benefits with accompanying higher premiums.

A lot of employers lost their ability to provide an HRA to their employees on the same terms as before, while others could no longer afford the new group health plans the ACA required. It was a hardship for many employers and employees alike.

ACA relief for small employers

Eventually, small employers found relief from the ACA through the Qualified Small Employer HRA. Legislated through the 21st Century Cures Act of 2016, this ‘new’ HRA returns the ability for employers with fewer than 50 employees (and therefore not under the mandate) to once again provide a stand-alone HRA to reimburse employees buying their own health insurance.

More HRA options for 2020

In October 2017, President Donald J. Trump issued Executive Order No. 13813, Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States. In part, it instructs the Departments of Treasury and Health and Human Services, “to increase the usability of HRAs, to expand employers’ ability to offer HRAs to their employees, and to allow HRAs to be used in conjunction with nongroup coverage.”

Less than two years later, in June, 2019, the President unveiled two new HRAs to do just that.

Available for plan years beginning on January 1, 2020, or later, the Integrated Coverage HRA allows employers of any size to offer an HRA to reimburse individual health insurance premiums to employees and the Excepted Benefit HRA is designed to accompany a group health plan but may be elected by employees whether or not they participate an employer’s group health insurance.

HRA vs. FSA

The main difference between the HRA and Health FSA is that the HRA is funded solely by the employer while the FSA can be funded by both the employee and the employer.

Who funds the account determines how funds accrue and what happens with unused funds at the end of a plan year.

The FSA must be pre-funded. This means that when an employee elects to contribute $2,600 (through bi-weekly pre-tax salary deductions of $100 throughout the year), the employer must make the entire $2,600 available on day 1. This puts the employer at some risk of loss, though it is usually minimal.

With an HRA, the employer has the option to fund the account on a month-to-month basis. The employer also decides what happens with unused HRA balances at the end of the year and can allow employees to roll remaining funds over to the next plan year.

In contrast, an FSA, has a use-it-or-lose-it rule for balances that exceed the employer’s optional rollover allowance (up to $500) or 75-day grace period.

Health Reimbursement Arrangements can be designed to meet a particular type of medical expense.

Limited HRA Plans can be restricted to just one type of expense, like prescription drugs.

 


HRA Plan Flexibility

An HRA provides group health coverage to employees while employers enjoy optimum flexibility to save on group health premiums through customized plan design options.

Accrual options

As mentioned earlier, a Health Reimbursement Arrangement (Account) must be 100% employer-funded. This means maximum flexibility in how funds are made available and how fund balances can accrue.

First, the employer determines how much the HRA will provide for each employee in a plan year.

The next step is deciding whether that amount is available all at once on the first day of the plan year (pre-funded) or on a month-to-month basis.

Finally, carryover rules are set for unused fund balances at the end of the plan year.

Coverage types

Employers may choose the type of group health coverage that matches the purpose the employer intends for the HRA:

HRA Plan Design Reimburses for: Coverage Type
Individual Coverage (ICHRA) Individual Health Insurance premiums and related medical expenses. Cannot offer group health insurance to employees offered an ICHRA.
Excepted Benefit (EBHRA) Dental, vision, and other excepted health expenses. Traditional Group Health Plan
Deductible-Gap Expenses that fall within the “gap” in deductible with a group HDHP vs. traditional coverage. High-Deductible Health Plan (HDHP)
Comprehensive Co-pays and co-insurance for medically necessary expenses. Traditional Group Health Plan
Qualified Small Employer (QSEHRA) Purchase of individual health coverage on the open market or exchange, and related medical expenses. No Group Health Plan (for employee groups of fewer than 50)
Section 105 HRA Eligible medical expenses including health insurance premiums. No Group Health Plan (1 employee)

Year-end balances

Since employers fully fund all HRAs, the decision of carrying over or forfeiting all or a portion of unused HRA funds lies with the employer.

When an employer allows full carryover of the fund balance at the end of the plan year, employees may:

  • Request reimbursement for medical expenses as they occur;
  • Accumulate a balance for reimbursement in the future; or,
  • Save the funds for retiree health benefits.
deductible gap reimbursement

Employers save big on group health premium while an HRA bridges the gap for those employees that actually experience a higher deductible expense.

 


General rules for Health Reimbursement Arrangements

Employer contributions only

One reason HRA plans allow such flexibility in spite of tightening group health plan regulations is that it is funded entirely by the employer. No employee contributions are allowed in an HRA, which eliminates IRS concerns over a refund of pre-taxed employee contributions.

This also lets employers keep control of funds and to decide what expenses are reimbursed through the plan, a key point of flexibility popular in HRA plans.

Important: When integrated with a group health plan, employees may pay their portion of the premiums with pre-tax salary deductions; however, no portion of the HRA may receive employee dollars.

Group health plan options

Health Reimbursement Arrangements work with a variety of group health plan options, depending on the HRA plan design. The employer may choose traditional group health insurance for employees or a high-deductible health plan.

Employers choosing the ICHRA, QSEHRA, or Section 105 one-person HRA plan designs do not sponsor a group health plan at all, but reimburse the employee for individual health coverage premium instead.

Tax-exempt for employees

Reimbursements through an HRA are tax-deductible for the employer and tax-exempt for employees. This means that everyone enjoys a tax advantage when an employer chooses an HRA.

HRA Plan Document Required

The Code requires that the HRA plan be in writing and that every participant receives a Summary Plan Description, (SPD).

Prohibition on mid-year changes does not apply

The 12-month period of coverage and prohibition of mid-year changes do not apply to an HRA.

COBRA

HRAs are generally subject to COBRA continuation coverage requirements unless the small employer exemption applies.

Nondiscrimination Rules

HRAs cannot discriminate in favor of highly compensated employees or between individuals in the same class of employees.

However, employers can differentiate between amounts provided for individual coverage vs. family coverage and, in some cases, provide higher amounts for individuals age 50 and over.

Owner participation

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 of said entities cannot participate in the HRA. This includes sole proprietors, partnerships, and LLCs; there are special exceptions owners of C corporations in integrated HRAs.

 


More resources

Ordering information

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Deductible Gap, Limited, Comprehensive, or PRA plan document $199
Excepted Benefit HRA plan document $199
Individual Coverage HRA plan document $199
Qualified Small Employer HRA plan document $199
One-Person Section 105 HRA plan document $199

 

Contact us

Want to make sure you’re choosing the best options to reduce group health premiums for your particular situation? Get in touch with a Health Reimbursement Arrangement plan design expert. Send us an email or call our friendly, knowledgeable staff at 1-888-755-3373

Brochures

deductible gap reimbursement HRA plan document

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Click to download the Core QSE  HRA plan document brochure and forms.

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Click here to open and view the Core 105 Plan Document Brochure and Forms for one-employee Health Reimbursement Arrangements.

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HRA Comparison Chart

Get a quick overview of all HRA plan designs — including the new 2020 models — with this handy chart:

Compare Health Reimbursement Arrangement plan designs with one easy click (download).

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