HRA Administration for Small Business - HRA Plan Docs

My employees are on their spouse's work insurance. A common speed bump for employers considering a reimbursement plan is understanding how employees that have medical insurance coverage through a spouse's employer will benefit. This is called employer-sponsored coverage. The most common example: employees having coverage through a spouse. There are two "types" of major medical insurance: Individual: meaning it is purchased by a person, an individual, as opposed to an organization. Individual coverage can cover an entire family. "Individual" refers to the purchaser. Individual insurance follows the individual, it is not tied to employment. Group: meaning it is purchased by an organization and offered to employees of the organization. Group coverage follows the organization, when one leaves the organization the coverage does not follow. All group coverage is sponsored by an "employer" or organization. Most employers offering group covera...

Confused About S-Corp Reimbursement Arrangements? Everybody seems to be confused about S-Corp shareholder participation in medical reimbursement plans. There is also confusion about S-Corp shareholders deducting health insurance costs and the steps that need to be taken to allow the deduction. This post is for S-Corp shareholders, why you absolutely want to participate in your business’s reimbursement plan and how to achieve the same tax advantage as your employees. Health reimbursement arrangements are all actually a version of a Self Insured Medical Reimbursement Plan, codified in 26 CFR 1.105-11. The different acronyms associated with the plans, HRA, HRP, MRP, MERP, HIRP, et al, are not exactly legal terms, even though you will find them in Treasury guidance, these are acronyms coined by administrators, brokers, insurance carriers and even the government to distinguish them from one another. They can have different plan structures and eligible expense exclusions depending...

Yes, you can have an HRA and an HSA at the same time and it is great... Okay, but there are some rules you have to follow and some extra work for the administrator. First, if you are making tax-free contributions to an HSA, the IRS requires  that individuals have a minimum deductible on their health insurance from all sources (including HRAs and QSEHRAs) in order to make tax deductible contributions to their Health Savings Account (HSA). We call this an HRA Deductible. However, there are some expenses that can be reimbursed through the HRA without regard to an HRA Deductible. These expenses include: Insurance premiums Wellness/preventive care Expenses resulting from accidents Dental expenses Vision expenses Real World Application It is important there is no confusion between having an HSA and making contributions to an HSA. Funds from an HSA can be used to pay for the qualified medical expenses of the account holder and her dependents, even if the account holder is...

The Legal Definition The Internal Revenue Code defines medical expenses in  26 U.S. Code § 213 : (d) Definitions For purposes of this section— (1) The term “medical care” means amounts paid— (A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body, (B) for transportation primarily for and essential to medical care referred to in subparagraph (A), (C) for qualified long-term care services (as defined in section 7702B(c)), or (D) for insurance (including amounts paid as premiums under part B of title XVIII of the Social Security Act, relating to supplementary medical insurance for the aged) covering medical care referred to in subparagraphs (A) and (B) or for any qualified long-term care insurance contract (as defined in section 7702B(b)). The Internal Revenue Service (IRS) establishes guidelines for what types of medical expenses may be reimbursed tax-free through an HRA. Th...

Employee Statuses The Qualified Small Employer HRA requires that the benefit be offered to all Full-Time Permanant employees that work an average of 30 hours per week. What does that mean? How does one know if an employee has to be included? In this section we will answer those questions by defining employee statuses. Full-Time Employee A full-time employee is an individual reasonably expected to work at least 30 hours per week. For this purpose, “hours” include each hour for which an employee is paid or entitled to payment for performing duties for the employer or entitled to payment even if no work is done (e.g. holiday, vacation or sick time). Employees with variable hours may also be considered fulltime, benefits eligible employees if they work an average of 30 hours or more per week during a look-back measurement period. Temporary (short-term) employees and seasonal employees may also be considered full time. Variable Hour Employees The ACA defines an empl...