Transcript All About HSAs - Jaeger & Flynn Associates

All About HRAs
Presented by
Jaeger & Flynn Assoc., Inc.
HRA Overview
 Mostly offered with a high-deductible
health plan (HDHP)
 May be offered as a stand-alone
 Employers may limit to retiree benefits,
preventive care or other uses
Benefits of HRAs
 Funded exclusively by employer
 Combined with an HDHP, can result in
considerable premium savings
 Employees have freedom of choice in
health care planning
 Employees manage their own costs
Benefits of HRAs
 Employers can use tax-
deductible dollars for
employees’ qualified
medical expenses
 Employees are able to
accrue funds for future
medical needs
Advantages for Employers
 Unused balances often revert to
employers
 Available to companies of any size
 Employers do not need to pre-fund
 Employers decide:
1)
2)
3)
4)
5)
6)
Amount contributed
Who is eligible
If carryovers will be allowed
How reimbursements will be processed
How the HRA will be funded
The contribution schedule
What Does an HRA Reimburse?
Substantiated medical expenses
described in Code § 213(d),
including out-of-pocket medical
expenses and health insurance, as
well as long-term care premiums,
accrued by the employee, spouse
or dependents and paid by the
employee.
What Are Qualifying Medical Expenses?
According to the IRS, they are
“The costs of diagnosis, cure,
mitigation, treatment, or
prevention of disease, and the
costs for treatments affecting
any part or function of the
body. They include the costs of
equipment, supplies and
diagnostic devices needed for
these purposes. They also
include dental expenses.”
HRA Coverage
Employer establishes:
 Coverage period
 Limit on reimbursements for that
period
 Limit can vary between employees
 Employer can offer higher limit to employees
with higher coinsurance payments
HRA Coverage
Employers make the
rules about whom
HRAs can cover,
which may include:
 Current employees
 Only those participating in an HDHP
 Only those participating in an HSA
 Former employees (including retirees)
 Their spouses/dependents
 Surviving spouse/dependents of deceased
employees
HRA Coverage
Self-employed individuals, including:
 Partners in a partnership
and
 More than 2 percent shareholders in an
S corporation
Self-employed individuals cannot
participate on a tax-favored basis
HRA Classification
 Viewed as a welfare benefit plan
 Is covered under ERISA unless it is a
governmental or church plan
 COBRA applies to an HRA
 Those continuing health coverage under
COBRA should be entitled to receive the
maximum reimbursement amount
 The issues surrounding HRAs/COBRA are
complex
What is the Difference Between
an HRA and an HSA?
 No HDHP is required with an HRA
 Stand-alone HRAs or HRAs combined with another
health plan are allowed
• HRAs do not require minimum deductibles
and maximum out-of-pocket limitations
• HRAs give plan sponsors more control
• Only the employer may contribute
What is the Difference Between
an HRA and an HSA?
 HRAs have no limits on how much an
employer can contribute in any given
month, year or other coverage period
 Claims submitted for reimbursement
must be substantiated
 HRA may not reimburse non-medical
expenses
 Interest earned on an HRA is paid to
employer
HRA and FSA Rules
HRAs are generally, but not always, FSAs – yet
are not subject to the following FSA rules:
 Prohibition against carrying unused benefits into
future plan years does not apply
 The mandatory 12-month period of coverage
does not apply
 Gives employers more flexibility in designing an HRA
 The uniform coverage rule does not apply
 The maximum amount of reimbursement under an HRA does
not have to be available at all times during the period of
coverage
HRA and FSA Rules
HRAs are generally, but not always, FSAs – yet
are not subject to the following FSA rules:
 An expense incurred by a participant in one year
may be paid out of the HRA balance attributable
to a subsequent year, provided that:
 The individual was a participant when the expense was
incurred
and
 That individual remains a participant in the subsequent year
 HRAs may reimburse health insurance
premiums
HSAs and HRAs
An individual may still make
contributions to an HSA while covered
by certain types of FSAs/HRAs. The IRS
sets forth four examples of acceptable
plan coordination, which follow.
Types of HRAs
Limited Purpose FSA/HRA
 Pays or reimburses Section 213(d)
medical expenses that are “permitted
coverage” (i.e., dental, vision)
 For example, an individual covered
under an HDHP and a Limited Purpose
FSA continues to be eligible to
contribute to an HSA
 The FSA only pays or reimburses
expenses for dental or vision care not
reimbursed by any other source
Types of HRAs
Post-Deductible FSA/HRA
 Pays or reimburses medical expenses incurred
after the individual meets the minimum annual
deductible within the HDHP
 For example, an individual may seek
reimbursement for amounts paid as copayments or
coinsurance
 Funds within an FSA are subject to the “use-it-orlose-it” rule; in general, the individual will forfeit
contributions made to FSA if deductible is not met
Types of HRAs
Suspended HRA
 Pursuant to an election made before the beginning
of the HRA coverage period
 Does not pay or reimburse at any time any medical
expenses incurred during suspension period,
except preventive care or “permitted coverage”
 Once suspension period ends, individual is no
longer eligible to contribute to an HSA because
he/she is entitled to receive Section 213(d) medical
expenses from the HRA
Types of HRAs
Retirement HRA
 Pays or reimburses medical expenses incurred
after the individual retires
 After retirement, individual is not eligible to
contribute to an HSA
Thanks for your
attention!
More questions? Contact Jaeger & Flynn
Assoc., Inc.
For more information, visit the IRS website: www.irs.gov.