Would you like to cut your health insurance premiums in half?

HRAs are the way to do it while providing
excellent coverage to your employees!!

Guide to Health Reimbursement Arrangements
and High Deductible Health Plans.

What Are The Rules For
Health Reimbursement Arrangements?

Favorable Tax Treatment. Coverage under an HRA and expenses reimbursed through the HRA are excludable from the covered individual’s gross income. As with FSAs, however, the individual may not claim an income tax deduction for an expense that has been reimbursed under an HRA.

Solely an Employer-Paid Benefit. An HRA must be paid solely with employer dollars. It cannot be paid for, directly or indirectly, through employee salary reduction elections, and it cannot be provided through the employer’s cafeteria plan.

Reimbursement for Medical Expenses Only. An HRA may be used only to reimburse employees for medical expenses (as defined in the tax law), provided that the employee provides proper substantiation. Reimbursable expenses include amounts paid for premiums for other accident or health coverage. Long Term Insurance premiums may be paid from an HRA, but direct long-term care expenses may not. An arrangement cannot qualify as an HRA if it permits participants to receive cash or any taxable or non-taxable benefit.

Carry-Over of Unused Coverage. One of the most significant features of HRAs is that they can allow the unused portion of plan coverage to be carried over to subsequent coverage periods. For example, any amounts left over at the end of a yearly coverage period may be carried forward to the next year’s coverage period. There are no limits on the amount that may be carried forward or the number of years for which an amount may be carried forward. However, at no time may the participant receive cash, directly or indirectly, for any unused amounts in the HRA.

Retirees May Be Covered. An HRA may cover both current and former employees (including retirees) and their spouses and tax dependents. The surviving spouse and dependents of a deceased employee may also be covered. Many employers have been interested in establishing defined contribution health plans as an alternative to or in conjunction with traditional retiree health care.

Coordination with Major Medical Plan. An HRA may be provided in conjunction with the employer’s primary group health plan. For example, the employer may offer a high-deductible major medical plan along with coverage under the HRA. Employees may use the HRA to receive reimbursement for deductibles, co-pays, and other expenses not covered under the primary group health plan.

	HRAs are the newest way for employers to give their employees freedom of choice in healthcare planning while controlling their own costs.
	HRAs are similar to Flexible Spending Accounts (FSAs) except that employees do not lose money at the end of the year. Unused dollars may be rolled-over into the next year!
	HRAs are similar to Medical Savings Accounts (MSAs) except that HRAs are funded by employers, HRAs are available to employers of all sizes, and HRAs are flexible in design.
	HRAs permit the employee to accumulate money for future healthcare needs such as retirement healthcare expenses.
	HRAs allow employers to redefine employer-employee healthcare financing and responsibility.
	HRAs allow employers to offer a high deductible plan and allocate the savings to the HRA for future employee-directed healthcare.
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