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EBHRA: How the Excepted Benefit HRA works for health care choice and savings

Too many companies pay more than necessary for one-size-fits-all group health plan benefits. The new Excepted Benefit HRA can reduce overall premium cost by giving employees a new choice in health coverage.

Excepted Benefit HRA health care choice and savings

Excepted Benefit HRA: a new choice in health coverage

Businesses that offer an employer-sponsored group health plan to workers now have another way to save money while designing a health benefit package with more choices for employees – the Excepted Benefit HRA.

The new EBHRA is a Health Reimbursement Arrangement designed to pay premiums and related expenses for eligible excepted benefits like dental and vision coverage.

And, while an employer is required to offer a traditional group health plan, an employee can participate in the EBHRA even if they decline participating in the employer’s group health plan. That’s going to open up a lot of premium savings for workers who are eligible for coverage under a spouse’s or parent’s health insurance.


The Excepted Benefit HRA is available to employers of any size for plan years beginning January 1, 2020, and later.

How it works

To establish an EBHRA, the employer first decides on the plan design. This includes the amount of the benefit, employee eligibility, types of expenses to reimburse, and more described later in this article.

This information is then formalized in a written plan document. Part of the plan document package is the summary plan description (SPD) that must be given to all employees eligible to participate in the EBHRA, at least 30 days prior to the start of every plan year. The SPD details the plan as well as providing information on the employer, its agent(s), the plan administrator, employer obligation, employee responsibilities, and various legal disclosures.

Core Documents simplifies all of this by offering the Core EBHRA Plan Document for only $199. This package provides employers with everything they need to establish the EBHRA as an IRS- and DOL-compliant tax-saving benefit plan.

What it covers

The Excepted Benefit HRA can reimburse employees for premiums on dental, vision, and other medical insurance premiums that are excepted benefits as well as eligible medical expenses related to those policies. For example, monthly vision insurance premiums plus the employee’s co-pay for eyeglasses.

An EBHRA can also reimburse employees for STLDI and COBRA premiums, and cost-sharing of eligible medical expenses (deductibles, co-pays, etc.).

Read the entire final rule, posted on the Federal Register:

Health Reimbursement Arrangements and Other Account-Based Group Health Plans

EBHRA Employer options

Employees covered

Since the Excepted Benefit HRA can only be offered to employees eligible for the employer’s group health plan, eligibility rules for the new HRA may be set along the same criteria.

An employer also has the option of varying terms for the EBHRA as long as the same terms (nondiscrimination) rule is met.

Same terms

The rules state that an employer must offer the same terms to similarly situated employees.

Similarly situated employees may be grouped according to HIPAA nondiscrimination rules of classification, which include:

  • full-time versus part-time status,
  • different geographic location,
  • membership in a collective bargaining unit,
  • date of hire,
  • current employee versus former employee status, and,
  • different occupations.

For example, an employee group defined as full-time with at least 90 days’ service may be eligible for both the traditional group health plan and EBHRA while a group defined as full-time with less than 90 days’ service will be eligible for the health plan but not the EBHRA.

Another example is, full-time employees with at least 90 days’ service and without a union contract are eligible for the group health plan plus an EBHRA of $1,800 (maximum limit) with 100% rollover while full-time employees with at least 90 days’ service working under a union contract are eligible for the group health plan but the EBHRA amount is only $1,000 with no year-end rollover.

This table shows how the above employee classes are determined:

Employee Classification Group Eligible for EBHRA

  • 90+ days’ service
  • No collective bargaining group


$1,800 Yes 100%

  • 90+ days’ service
  • Part of collective bargaining group


$1,000 No

  • Less than 90 day’s service
GHP n/a n/a

Disallowed classification criteria

An employer may not condition eligibility for an Excepted Benefit HRA on the employee’s declining to enroll in the employer’s traditional group health plan.

An employee group based on any health factor of the participants or beneficiaries is forbidden.

Amount of EBHRA benefit

For plan years beginning or after January 1, 2020, and throughout the calendar year following, an employer can provide up to $1,800 in an Excepted Benefit HRA.

This amount will be reviewed each year and adjusted for inflation as needed.


An EBHRA is generally used to reimburse premiums for excepted benefit insurance like dental or vision coverage or other medical excepted benefit policies.

At the discretion of the employer, an Excepted Benefit HRA may also reimburse for:

  • Short-term limited-duration insurance (STLDI);
  • COBRA continuation of coverage premium; and,
  • Cost sharing of co-pay, deductible, and other eligible medical expenses.

It may not reimburse Medicare Part B or D premiums or any part of an individual coverage or group health plan premium (except for COBRA continuation or individual coverage policies that consist solely of excepted benefits).


An HRA usually allows unused amounts at the end of a plan year to rollover into the new plan year; however, this is not required. Employers may design the EBHRA so that unused amount are surrendered back to the employer at the end of a plan year, a so-called “use it or lose it” provision.

When a rollover is allowed, the amount rolled over does not count toward the annual limit for the new plan year.

Plan year

All HRAs run according to a 12-month plan year set by the employer.

Calendar plan year

Most HRAs use a calendar plan year that begins on January 1 and ends on December 31.

Short first year

Employers can begin an EBHRA with a calendar plan year at any time throughout the year using a short plan year for the first year.

For example, the employer wants the HRA to have a standard calendar plan year but would like to begin offering the benefit as soon as possible. Using a short first plan year, the EBHRA would start with a plan year running July 1, 2020 through December 31, 2020.

Starting with January 1, 2021, all following plan years would be set as standard calendar plan years.

Non-calendar plan year

While a calendar plan year works well with the Individual Coverage HRA, it is not required. Employers may choose to run their benefit plan in line with their fiscal or tax year, or their group health plan renewal date.

A short first plan year can be used to make this adjustment as well.

More EBHRA considerations

Coordination with ICHRA

An Individual Coverage HRA may not be offered to any class of employees that is offered a group health plan.

An Excepted Benefit HRA may only be offered to a class of employees that is offered a group health plan.

Therefore, an ICHRA and an EBHRA may not be offered at the same time to workers within the same employee classification group.

Premium tax credit

The EBHRA does not cause participants to lose eligibility for the ACA premium tax credit. This includes EBHRAs that reimburse for cost sharing and eligible medical expenses not covered by individual health insurance.

Plan document requirement

Employers sponsoring an Excepted Benefit HRA must have a written plan document signed and on file at all times.

The plan document lays out in sufficient detail the terms of the plan, such as employee eligibility, covered expenses, amount of the benefit, employee classifications, etc., and must include a summary of benefits; employee rights and responsibilities; employer obligations; possible causes of denial, disqualification, or denial of benefits; procedures for claims and redress; contact and other information of the employer, its agents, and the plan administrator; and, additional legal disclosures.

This information is also part of the Summary Plan Description (SPD) required as written notice to eligible employees.

Written notice

The employer-sponsor of an Excepted Benefit HRA must provide a Summary Plan Description (SPD) to employees no later than 30 days before the first day of every plan year.

Plan Documents made easy

It is perhaps the most complex and important written requirement for employers setting up any tax-saving benefit plan — the plan document and SPD rule. And, it has to be done right.

core Eb-HRA excepted Benefit HRA plan Core Documents has simplified this process for employers and their agents with our all-in-one plan document packages.  For one low price, the Core EBHRA Plan Document package includes:

  • Signature-ready plan document;
  • Corporate resolution to adopt an Individual Coverage HRA;
  • Summary Plan Description (SPD);
  • Employee election forms;
  • Claim forms; and,
  • Administrative handbook.

All an employer has to do once the Core EBHRA package arrives is:

  1. Print and sign the Plan Document, and,
  2. At least 30 days before each plan year begins, distribute the SPD with election and claim forms to every eligible employee.

The plan document is not filed with the IRS, DOL, or any other government agency. Just keep it on file and available in case of an IRS audit, the DOL requesting a copy, an employee asking to view the document, and for internal administrative guidance.

Election forms must be signed by employees, returned to the employer, and kept on file.

The Core EB-HRA Plan Document package is available
for delivery beginning November 15, 2019.

Click below to place your order today, or

click here  and we’ll send you a reminder in mid-November.


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 $249 in PDF email* + Deluxe Binder via USPS

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