All HRA plans, from the Single Participant 105 plan to the Qualified Small Employer HRA, function in similar ways. Over the years employers have begun to realize the value of the HRA as a total replacement strategy
What is a Health Reimbursement Arrangement (HRA)?
There are two families of HRA, traditional Section 105 HRAs and Qualified Small Employer 9831(d) HRAs. Both are employer-funded health plans that reimburse employees tax-free for eligible out-of-pocket medical expenses, including individual health insurance premiums. The differences lie in the plan structure, various structures have evolved over the decades to comply with the constantly changing regulatory environment.
How do they work?
Employers define a dollar amount they are willing to contribute to employees’ medical expenses. Employees spend money on qualified medical expenses and submit a request to be reimbursed and proof of the expense to the employer or the employer’s claim reviewer. Once approved the company reimburses the employee tax-free for the expenses up to the limit set by the employer.
Changes in Regulations.
Prior to the passage of the 21st Century Cures Act all HRAs were regulated as group health plans. Most still are, with the exception of the Qualified Small Employer HRA. The QSEHRA is exempt from federal group health plan regulation so long as it complies with IRC 9831(d).
Today’s Uses
Both types of HRA are widely used today. What type of HRA is appropriate largely depends on an employer’s tax structure and employee count. Most small businesses with under 50 FTEs would likely benefit from an HRA through direct tax savings or the intrinsic value of providing employees a formal health benefit.
What is a Health Reimbursement Arrangement (HRA)?
There are two families of HRA, traditional Section 105 HRAs and Qualified Small Employer 9831(d) HRAs. Both are employer-funded health plans that reimburse employees tax-free for eligible out-of-pocket medical expenses, including individual health insurance premiums. The differences lie in the plan structure, various structures have evolved over the decades to comply with the constantly changing regulatory environment.
How do they work?
Employers define a dollar amount they are willing to contribute to employees’ medical expenses. Employees spend money on qualified medical expenses and submit a request to be reimbursed and proof of the expense to the employer or the employer’s claim reviewer. Once approved the company reimburses the employee tax-free for the expenses up to the limit set by the employer.
Changes in Regulations.
Prior to the passage of the 21st Century Cures Act all HRAs were regulated as group health plans. Most still are, with the exception of the Qualified Small Employer HRA. The QSEHRA is exempt from federal group health plan regulation so long as it complies with IRC 9831(d).
Today’s Uses
Both types of HRA are widely used today. What type of HRA is appropriate largely depends on an employer’s tax structure and employee count. Most small businesses with under 50 FTEs would likely benefit from an HRA through direct tax savings or the intrinsic value of providing employees a formal health benefit.
Comments
Post a Comment