Presentation on theme: "Presented by Jaeger & Flynn Assoc., Inc."— Presentation transcript:
1 Presented by Jaeger & Flynn Assoc., Inc. All About HRAsPresented byJaeger & Flynn Assoc., Inc.
2 HRA Overview Mostly offered with a high-deductible health plan (HDHP) May be offered as a stand-aloneEmployers may limit to retiree benefits, preventive care or other uses
3 Benefits of HRAs Funded exclusively by employer Combined with an HDHP, can result in considerable premium savingsEmployees have freedom of choice in health care planningEmployees manage their own costs
4 Benefits of HRAsEmployers can use tax-deductible dollars for employees’ qualified medical expensesEmployees are able to accrue funds for future medical needs
5 Advantages for Employers Unused balances often revert to employersAvailable to companies of any sizeEmployers do not need to pre-fundEmployers decide:Amount contributedWho is eligibleIf carryovers will be allowedHow reimbursements will be processedHow the HRA will be fundedThe contribution schedule
6 What Does an HRA Reimburse? Substantiated medical expenses described in Code § 213(d), including out-of-pocket medical expenses and health insurance, as well as long-term care premiums, accrued by the employee, spouse or dependents and paid by the employee.
7 What Are Qualifying Medical Expenses? According to the IRS, they are “The costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. They include the costs of equipment, supplies and diagnostic devices needed for these purposes. They also include dental expenses.”
8 HRA Coverage Employer establishes: Coverage period Limit on reimbursements for that periodLimit can vary between employeesEmployer can offer higher limit to employees with higher coinsurance payments
9 HRA CoverageEmployers make the rules about whom HRAs can cover, which may include:Current employeesOnly those participating in an HDHPOnly those participating in an HSAFormer employees (including retirees)Their spouses/dependentsSurviving spouse/dependents of deceased employees
10 HRA Coverage Self-employed individuals, including: Partners in a partnershipandMore than 2 percent shareholders in an S corporationSelf-employed individuals cannot participate on a tax-favored basis
11 HRA Classification Viewed as a welfare benefit plan Is covered under ERISA unless it is a governmental or church planCOBRA applies to an HRAThose continuing health coverage under COBRA should be entitled to receive the maximum reimbursement amountThe issues surrounding HRAs/COBRA are complex
12 What is the Difference Between an HRA and an HSA? No HDHP is required with an HRAStand-alone HRAs or HRAs combined with another health plan are allowedHRAs do not require minimum deductibles and maximum out-of-pocket limitationsHRAs give plan sponsors more controlOnly the employer may contribute
13 What is the Difference Between an HRA and an HSA? HRAs have no limits on how much an employer can contribute in any given month, year or other coverage periodClaims submitted for reimbursement must be substantiatedHRA may not reimburse non-medical expensesInterest earned on an HRA is paid to employer
14 HRA and FSA RulesHRAs are generally, but not always, FSAs – yet are not subject to the following FSA rules:Prohibition against carrying unused benefits into future plan years does not applyThe mandatory 12-month period of coverage does not applyGives employers more flexibility in designing an HRAThe uniform coverage rule does not applyThe maximum amount of reimbursement under an HRA does not have to be available at all times during the period of coverage
15 HRA and FSA RulesHRAs are generally, but not always, FSAs – yet are not subject to the following FSA rules:An expense incurred by a participant in one year may be paid out of the HRA balance attributable to a subsequent year, provided that:The individual was a participant when the expense was incurredandThat individual remains a participant in the subsequent yearHRAs may reimburse health insurance premiums
16 HSAs and HRAsAn individual may still make contributions to an HSA while covered by certain types of FSAs/HRAs. The IRS sets forth four examples of acceptable plan coordination, which follow.
17 Types of HRAs Limited Purpose FSA/HRA Pays or reimburses Section 213(d) medical expenses that are “permitted coverage” (i.e., dental, vision)For example, an individual covered under an HDHP and a Limited Purpose FSA continues to be eligible to contribute to an HSAThe FSA only pays or reimburses expenses for dental or vision care not reimbursed by any other source
18 Post-Deductible FSA/HRA Types of HRAsPost-Deductible FSA/HRAPays or reimburses medical expenses incurred after the individual meets the minimum annual deductible within the HDHPFor example, an individual may seek reimbursement for amounts paid as copayments or coinsuranceFunds within an FSA are subject to the “use-it-or-lose-it” rule; in general, the individual will forfeit contributions made to FSA if deductible is not met
19 Types of HRAs Suspended HRA Pursuant to an election made before the beginning of the HRA coverage periodDoes not pay or reimburse at any time any medical expenses incurred during suspension period, except preventive care or “permitted coverage”Once suspension period ends, individual is no longer eligible to contribute to an HSA because he/she is entitled to receive Section 213(d) medical expenses from the HRA
20 Types of HRAs Retirement HRA Pays or reimburses medical expenses incurred after the individual retiresAfter retirement, individual is not eligible to contribute to an HSA
21 Thanks for your attention! More questions? Contact Jaeger & Flynn Assoc., Inc.For more information, visit the IRS website: