I've got a few questions I was hoping could get answered here. First some background:
We will be setting up a high deductible health plan (HDHP) for all of our employees.
The HDHP will have a Health Savings Account (HSA) set up for each employee. The HSA would be minimally funded by the employer on a monthly bases. It would just be a small % of the employee's deductible. The % of the deductible contributed would be the same for all employees.
We would also like to set up a Health Reimbursement Arrangement (HRA) that the employer would contribute to on a monthly basis. The HRA would be more heavily funded, but contribute only to costs incured directly through the HDHP (health plan)
Employees will have to pay for a portion of their health premiums.
So here's a bunch of questsions that have come up:
Anti-Discrimination:
From what I've read contributions to an employee's HSA must either be the same for all employees or be the same % of their deductible. Is the employer also able to do contributions based on a flat % of the premium? The idea is employees with higher premiums get more contributed, since they theoretically would have higher health care costs.
Do HRA's have the same rules regarding contributions to accounts?
Paying Insurance Premiums:
If the employee is required to pay for a portion of their premium, can they be reimbursed through the HRA for what they paid? From my understanding if their premium payment comes from a pre-tax salary reduction, the HRA can not reimburse premium payments.
Is it possible to have the employee pay for a portino of their premium with post tax dollars? In that case, would they be able to be reimbursed through the employer funded HRA?
HRA Accounts:
Do HRA accounts have to be set up and funded for each individual employee? Can the employer set up a single large 'company' fund which they contribute to? Then individual employee approved costs would be reimbursed from the pool.
Individual HRA Growth:
At the end of each year, funds left in the HRA would just roll over and continue to grow. If an individual's HRA balance reaches a certain level, can the employer stop making contributions to it until some of the funds are spent? Would stopping to contribute to some (high balance) HRA's while continuing to fund others fall under anti-discrimination rules?
Wow, I know that's a lot, but it's hard to find some of the specific information out there. Thanks a ton for anyone who can help out on any of the points.
I would be happy to address a few of your questions. I work for BASE www.baseonline.com - a benefit administrator that works with small to mid sized companies to establish HRA's and 125 Cafeteria Plans.
If you would like to discuss further, please call me directly 800-309-8012 x234.
Do HRA's have the same rules regarding contributions to accounts?
Paying Insurance Premiums:
If the employee is required to pay for a portion of their premium, can they be reimbursed through the HRA for what they paid? From my understanding if their premium payment comes from a pre-tax salary reduction, the HRA can not reimburse premium payments.
Is it possible to have the employee pay for a portino of their premium with post tax dollars? In that case, would they be able to be reimbursed through the employer funded HRA?
Answer: Premiums are not reimburseable within an HRA due to small group reform regulations that state that an employer cannot directly or indirectly pay for insurance premiums. Your best benefit is to allow the employee portion of premium to be paid with pre-tax dollars through the 125 Cafeteria Plan.
HRA Accounts:
Do HRA accounts have to be set up and funded for each individual employee? Can the employer set up a single large 'company' fund which they contribute to? Then individual employee approved costs would be reimbursed from the pool.
Answer: HRA's are not required to have any pre-funding and/or 'accounts' established. There are definately not individual accounts, so if an account is created for HRA dollars, the account would be a single large company fund. All eligible reimbursements would be made from the pool of dollars. Again, the HRA does not require any pre-funding so a companies regular cash flow account could be used. It is recommended to set aside the HRA dollars to alleviate any funding issues.
Individual HRA Growth:
At the end of each year, funds left in the HRA would just roll over and continue to grow. If an individual's HRA balance reaches a certain level, can the employer stop making contributions to it until some of the funds are spent? Would stopping to contribute to some (high balance) HRA's while continuing to fund others fall under anti-discrimination rules?
Answer: The feature you are speaking of is called Carry Over funds. Yes, the HRA does allow carry over of unspent funds. An employer can establish this at time of set up and/or at renewal time. Employer can allow no carry over (benefit is an annual ammount) and resets each plan year. Employer can establish limits to carry over funds such as a % of unspent funds or a dollar amount and then cap that amount or put a time frame on it (example- employee can carry over 50% of all unspent funds for 3 years) These parameters are established as part of the plan and are the same for all eligible participants.
Please call me at BASE if you would like to further discuss this or have additional questions.
Joe Havenhill 800-309-8012 x 234
Message Edited by NicoleD on 12-15-2009 03:20 PM
joehavenhill | Window Shopper | 12/15/2009 - 2:03 pm
NicoleD | Former Moderator | 12/15/2009 - 3:22 pm
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