HRA HRA -Health Reimbursement Health Reimbursement - - - PowerPoint PPT Presentation
HRA HRA -Health Reimbursement Health Reimbursement - Arrangement- - Arrangement June 2002 June 2002 Rev. Rul Rev. Rul. 2002 . 2002- -45 45 IRS Notice 2002- -45 45 IRS Notice 2002 Its the old Medical Reimbursement Plan or Sec
June 2002 Rev.
. 2002-
45 IRS Notice 2002 IRS Notice 2002-
45 It’s the old Medical Reimbursement Plan or Sec 105 Plan polished It’s the old Medical Reimbursement Plan or Sec 105 Plan polished up up
► ► HRA must be funded
HRA must be funded solely solely by employer by employer
► ► No employee contributions
No employee contributions
► ► HRA can only reimburse substantiated medical
HRA can only reimburse substantiated medical care expenses under Code Sec 213 care expenses under Code Sec 213
► ► For employees, spouse and tax dependents or
For employees, spouse and tax dependents or former employees and retirees (unless excluded) former employees and retirees (unless excluded)
► ► Claims after plan inception
Claims after plan inception
► ► No cash out of unused account
No cash out of unused account
► ► May allow terminated employees to file claims
May allow terminated employees to file claims against balance against balance
► ► Benefit subject to COBRA
Benefit subject to COBRA
► ►No requirement to participate in the group
No requirement to participate in the group insurance insurance
► ►Benefits available to all who meet eligibility
Benefits available to all who meet eligibility requirements requirements
► ►HRA benefit requires insurance participation
HRA benefit requires insurance participation
► ►Typically high deductible policy
Typically high deductible policy
► ►Define deductible level or out of pocket limit
Define deductible level or out of pocket limit
► ► Adopt a plan document
Adopt a plan document
► ► Communicate to employees
Communicate to employees Eligible Employees Eligible Employees
► ► May have minimum age and service for employees
May have minimum age and service for employees to be eligible to be eligible
► ► Must be a C
Must be a C-
Corp for owner participation
► ► Excludes self
Excludes self-
employed, partners, and more than 2% Sub 2% Sub-
S shareholders
► ►May be covered or not
May be covered or not Eligible expenses Eligible expenses
► ►Same as Cafeteria Plan, Sec 213 Expenses.
Same as Cafeteria Plan, Sec 213 Expenses.
See Publication 502 at See Publication 502 at www.CafeteriaPlan.com www.CafeteriaPlan.com
► ►May also allow health insurance
May also allow health insurance reimbursement (possible HIPAA problems) reimbursement (possible HIPAA problems)
► ►Design options: Have a deductible.
Design options: Have a deductible. Reimburse 80% of out of pocket expenses Reimburse 80% of out of pocket expenses
Annual Limit Annual Limit
► ►No limit
No limit
► ►Amount chosen may be available Jan 1, or
Amount chosen may be available Jan 1, or accrued monthly accrued monthly
► ►Reimburse only up to accrual
Reimburse only up to accrual (no advance funding like Cafeteria Plan) (no advance funding like Cafeteria Plan)
► ►Big advantage, but not required. May cap
Big advantage, but not required. May cap the carryover amount the carryover amount Forfeit vs. Spend Down Forfeit vs. Spend Down
► ►Employer may choose to forfeit unused
Employer may choose to forfeit unused amounts on termination or allow employee amounts on termination or allow employee to spend down COBRA. Must be offered to spend down COBRA. Must be offered either way either way
Funded vs. Unfunded Funded vs. Unfunded
► ► Most unfunded. Paid from company assets.
Most unfunded. Paid from company assets. Funded requires trust reporting. VEBA plan doc + Funded requires trust reporting. VEBA plan doc + Sec 419 & 419A deduction limits Sec 419 & 419A deduction limits Single/ Two Party/ Family Single/ Two Party/ Family
► ► Possible, but beware of discrimination
Possible, but beware of discrimination Administration Costs Administration Costs
► ► HRA may fund administration costs for retired or
HRA may fund administration costs for retired or terminated employees terminated employees
► ► Same as Cafeteria Plan. Requires full documentation prior
Same as Cafeteria Plan. Requires full documentation prior to reimbursement to reimbursement
► ► COBRA
COBRA
► ► HRA is a group health plan subject to COBRA
HRA is a group health plan subject to COBRA
► ► May design plan to link COBRA election of insurance & HRA
May design plan to link COBRA election of insurance & HRA (can’t take HRA without insurance) (can’t take HRA without insurance)
► ► Terminated employee on COBRA gets new annual
Terminated employee on COBRA gets new annual employer contribution employer contribution
► ► Employee has $3,000 HRA account and gets divorced.
Employee has $3,000 HRA account and gets divorced. Spouse may elect COBRA and also get $3,000. Annual Spouse may elect COBRA and also get $3,000. Annual HRA accrual goes to both. HRA accrual goes to both.
Determining COBRA Premium Determining COBRA Premium
► ►This one gets fuzzy
This one gets fuzzy HRAs HRAs must satisfy non discrimination must satisfy non discrimination requirements of Sec. 105 requirements of Sec. 105
► ►May not discriminate as to eligibility and
May not discriminate as to eligibility and
compensation, age or years of service compensation, age or years of service
► ►To download a copy of this presentation,
To download a copy of this presentation, head to: head to: