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.