When implementing a Health Reimbursement Arrangement (HRA) into a business, it can come with its own set of challenges and be confusing for an employee. BASE® has a few tips to help every business experience success with an HRA, save valuable tax dollars, and provide the employees with a competitive benefits package!
A Health Reimbursement Arrangement (HRA) is a tax-advantaged, employer-funded, benefit plan in which employees are reimbursed tax-free for qualified medical expenses not covered by the employer’s group health plan, helping both the employer and employee save on health care expenses.
4 tips for implementing a successful, and compliant, HRA:
- Determine an HRA allowance. Helpful tip: the allowance amount will depend on the type of HRA. Some HRAs have maximum contribution limits, while others do not. If the employer decides to implement a BASE® Qualified Small Employer HRA (QSEHRA) or the BASE® Excepted Benefit HRA (EBHRA), there are maximum contribution limits. With the QSEHRA, the 2020 contribution limit is $5,250 for self-only and $10,600 for family, and with the EBHRA, the 2020 contribution limit is $1,800. HRAs that do not have contribution limits, the allowance amount is set at the discretion of the employer.
- Employee eligibility. Helpful tip: employee eligibility will depend on the type of HRA. Each HRA will reimburse a different group of employees. With the QSEHRA, all full-time employees are eligible that have minimum essential coverage (MEC). With the BASE® Individual Coverage HRA, the employer determines eligibility based on employee class. With the BASE® Integrated HRA, all employees that participate in the company’s group health insurance qualify.
- Helpful tip: the reimbursement will depend on the type of HRA. Employees will incur a qualified health care expense, provide documentation, and submit for reimbursement. The employer will evaluate if the medical expense is qualified to be reimbursed, or have a third-party administrator such as BASE®, to substantiate the qualified expense. Depending on the HRA, health insurance premiums, copays, prescriptions, over the counter (OTC) medicine, and other qualified medical expenses not covered by insurance can be reimbursed.
- Legal documents. Helpful tip: not having legal documents in place could cost an employer regardless of the type of HRA. A business needs to be in compliance, otherwise the HRA will be at risk for IRS monetary penalties due to improper documentation. With the BASE® ERISA Wrap, BASE® helps employers fulfill the ERISA requirements and the proper documentation that is required to protect the plan. The Wrap SPD and Plan Document are designed to wrap around existing certificates of insurance and benefit plan booklets to provide the required provisions and information necessary to comply with ERISA.
Success means seeing a favorable or desired outcome, so let BASE® provide you with more information on how to see success with the right HRA. Whether a business is self-employed or has multiple employees, there is an HRA for every business type. Call BASE® at 888-386-9680 or visit www.BASEonline.com.