1. Presented by Jaeger & Flynn Assoc., Inc.
All About HRAs
Presented by
Jaeger & Flynn Assoc., Inc.

2. HRA Overview Mostly offered with a high-deductible health plan (HDHP)
May be offered as a stand-alone
Employers 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 savings
Employees have freedom of choice in health care planning
Employees manage their own costs

4. Benefits of HRAs
Employers can use tax-deductible dollars for employees’ qualified medical expenses
Employees are able to accrue funds for future medical needs

5. Advantages for Employers
Unused balances often revert to employers
Available to companies of any size
Employers do not need to pre-fund
Employers decide:
Amount contributed
Who is eligible
If carryovers will be allowed
How reimbursements will be processed
How the HRA will be funded
The 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 period
Limit can vary between employees
Employer can offer higher limit to employees with higher coinsurance payments

9. HRA Coverage
Employers make the rules about whom HRAs can cover, which may include:
Current employees
Only those participating in an HDHP
Only those participating in an HSA
Former employees (including retirees)
Their spouses/dependents
Surviving spouse/dependents of deceased employees

10. HRA Coverage Self-employed individuals, including:
Partners in a partnership
and
More than 2 percent shareholders in an S corporation
Self-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 plan
COBRA applies to an HRA
Those continuing health coverage under COBRA should be entitled to receive the maximum reimbursement amount
The issues surrounding HRAs/COBRA are complex

12. What is the Difference Between an HRA and an HSA?
No HDHP is required with an HRA
Stand-alone HRAs or HRAs combined with another health plan are allowed
HRAs do not require minimum deductibles and maximum out-of-pocket limitations
HRAs give plan sponsors more control
Only 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 period
Claims submitted for reimbursement must be substantiated
HRA may not reimburse non-medical expenses
Interest earned on an HRA is paid to employer

14. HRA and FSA Rules
HRAs 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 apply
The mandatory 12-month period of coverage does not apply
Gives employers more flexibility in designing an HRA
The uniform coverage rule does not apply
The 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 Rules
HRAs 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 incurred
and
That individual remains a participant in the subsequent year
HRAs may reimburse health insurance premiums

16. HSAs and HRAs
An 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 HSA
The FSA only pays or reimburses expenses for dental or vision care not reimbursed by any other source

18. Post-Deductible FSA/HRA
Types of HRAs
Post-Deductible FSA/HRA
Pays or reimburses medical expenses incurred after the individual meets the minimum annual deductible within the HDHP
For example, an individual may seek reimbursement for amounts paid as copayments or coinsurance
Funds 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 period
Does 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 retires
After 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: