Two months ago, NueSynergy wrote about several Health Reimbursement Arrangement (HRA) FAQs to keep in mind. Now, taking it a step further, NueSynergy will discuss what employers, specifically, should look for in regard to an HRA. Here it is as follows:
An HRA can be paired with any health plan with no limitations
This means that high-deductible health plans (HDHPs) are not required in order to offer this account.
What happens to the funds if my employee leaves the company?
HRA funds are not portable. Therefore, if any funds become unused then any remaining amount returns to you (employer).
An employer can only contribute funds to an HRA
This also means that owners and partners cannot participate in this account. Per IRS guidelines, anyone with two percent or more ownership in a schedule S corporation, LLC, LLP, sole proprietorship, or partnership may not participate. If you would like to provide an opportunity for your employee to save for additional medical expenses tax-free, then suggest them to enroll in a Flexible Spending Account (FSA).
As an employer, can I choose proration for new hires and family status change?
Yes. You can prorate contributions as long as it occurs throughout the year.
When does an HRA begin paying for an employee’s expenses?
An employer can either allow an HRA to pay before the employee meets any deductible, or it can be set up so that the employee has to meet a certain amount of out-of-pocket expenses before the HRA begins to pay.
Back in the spring, NueSynergy wrote about the basics of a Spousal Incentive Health Reimbursement Arrangement (SIHRA). Now, as the year closes, NueSynergy is excited to list off many frequently asked questions (FAQs), associated with this account. Here they are as followed:
How does a SIHRA work and how is it beneficial?
A SIHRA’s goal is to offer an employee’s spouse the opportunity for full coverage on eligible health expenses without the hassle of co-pays, coinsurance, and deductibles. This is all possible if an employee is part of a company’s group health plan. Once that’s established, then an employee can simply elect their spouse and/or dependent(s) to the plan. This allows their spouse to become incentivized through a SIHRA if he/she has access to a group health plan through their employer or a different organization.
When does enrollment start?
Enrollment takes place either within 30 days of a qualifying event, during the spouse’s annual open enrollment window or once a new employee is eligible for benefits.
What’s the enrollment process?
The process is as follows:
- Employee elects coverage for themselves (or employee + dependent) on employer-sponsored group health plan
- Employee’s spouse enrolls in his/her qualified alternate group health plan
- Employee (or their spouse) completes SIHRA enrollment and attestation e-forms via the online benefit administration system and provides proof of premium contribution paid for alternate group plan coverage
How to complete SIHRA enrollment?
In order to complete enrollment, a spouse is required to provide:
- Proof of paid premium contribution: paystub showing premium contribution amount (pre or post tax)
- Plan details indicating the cost of each coverage tier (not required if the entire family is enrolling)
Health Reimbursement Arrangements (HRAs) are tax-advantaged, employer-funded accounts geared to help pay for qualified medical expenses not covered by a health plan. Months ago, NueSynergy explained the benefits of an HRA. Now, it’s time to discuss five frequently asked questions relating to this account.
FAQ #1: How much can an employer contribute to an employees’ HRA?
An employer can contribute any dollar amount, so long as it’s above a minimum annual commitment of $250 per employee. This commitment is a promise-to-pay, with funds allocated only if and when an eligible claim is incurred.
FAQ #2: When does an HRA start paying for an employee’s expenses?
The employer has two options. They can either allow the HRA to pay before the employee meets any deductible, or they can set it up so an employee has to meet a certain amount of out-of-pocket expenses before an HRA begins to pay.
FAQ #3: Does an HRA provide a tax benefit for employees?
Yes. HRA funds are contributed to employees on a pre-tax basis. This means disbursements aren’t included when calculating taxable income. For this reason, employees cannot claim an income tax deduction for expenses that haven’t been reimbursed under an HRA.
FAQ #4: Do HRA contributions have to be made in equal amounts each month?
They can be, but an HRA can also make contributions available Day 1 of the plan. Regardless of which method, an employer holds the money until qualified expenses are incurred and then reimbursed.
FAQ #5: What happens to HRA funds if an employee leaves the company?
Since funds are funded by an employer, any funds go back to them if an employee terminates for any reason.
NueSynergy’s smart debit card is always included at no cost and provides a convenient method to pay out-of-pocket medical expenses for you, your spouse, and/or any dependents. The card is automatically issued to all Flexible Spending Account (FSA) and Health Savings Account (HSA) participants, as well as for Health Reimbursement Arrangement (HRA) plans (when compatible with the plan design).
Here’s how the smart debit card works:
- Funds are deposited into your benefit account in real time
- When you swipe your debit card, funds are pulled directly from your benefit account to pay the service provider on site. Since it’s a smart card, swiping to pay providers is thoughtless for the user, as the funds will automatically pull from the correct account.
Here are also two important details to know about NueSynergy’s debit card:
- Allows participants to auto substantiate 80% of claims
- Any out-of-pocket expenses that require reimbursement will be paid out via direct deposit or personal check
An ICHRA is an acronym for an Individual Coverage Health Reimbursement Arrangement. This is a reimbursement account set up and funded by an employer that helps pay for health insurance premiums incurred throughout the plan year. This is also designed to help offset out-of-pocket financial responsibilities associated with an employee’s healthcare. Additionally, the funds in this account can be used to pay for individual health insurance premiums each month.