Health Reimbursement Arrangement

Key Features:

• The employer makes a monthly contribution into the Health Reimbursement Arrangement (HRA) for each employee: for example, $50 monthly contribution, or $600 annually with a $1,000 deductible plan.
• HRA Funds can be used for IRS approved expenses as long as funds available in the HRA were incurred by employee/dependent during period of eligibility; Funds cannot be reimbursed by any other source, example: other insurance plan.
• HRA Funds “roll-over” from year to year
• If the employee terminates, HRA funds are no longer available. Funds are refunded to the employer at the end of the year for any employee who terminates employment and does not choose continuation of the HRA, in accordance with COBRA provisions.
• The employee has the right to continue paying monthly HRA contribution, including administration fee to the third party administrator, in order to access funds in accordance with COBRA provisions.

Benefits to the Employer:

• Lower premiums for high deductible medical plan
• Any funds reimbursed from the HRA are exempt from employer’s payroll taxes and Social Security taxes
• Encourages employees to use medical plan and HRA funds conservatively to ensure future available benefits and may dampen future medical trends and claims experience.
• Employees become more aware of the real cost of medical care, which may also dampen future medical trends and claims experience.
• The high deductible medical plan provides a financial incentive to encourage employees to adopt healthy lifestyles.

Employee Benefits:

• Lower premium high deductible medical plan provides lower monthly premium contributions for employees and family members.
• Employees who typically do not use any medical benefits, and may not value benefit plans, will have access to HRA funds to pay for allowable “IRC 213” expenses (same as FSA allowable expenses).
• Unspent funds in the HRA will roll over each year and accumulate while employee continues to work for the employer. Funds will help offset any future catastrophic illness or injury, subject to any maximum as determined by the employer and noted in the Summary Plan Description (SPD).

Other Plan Design Options

• The employer determines amount and frequency (monthly or annual) of the contribution to the HRA.
• The employer determines maximum amount of funds in the HRA.
• HRA funds could be used to pay health insurance premiums described in Code 213(D)1D, but it is critical that all contributions to the HRA are made with employer funds.
• The employer could choose to allow employees to keep HRA funds after termination, but this will increase the administrative cost of the plan and create additional financial liabilities.
• The employer could offer an HRA, in addition to an FSA program, which includes employee contributions, in addition to the HRA. Claims will be paid from the FSA funds prior to pulling from the HRA account.

Other Important Information

• Self-employed individuals, partners, 2% owners of an S-Corporation are not eligible.
• Recommended that HRA reimbursements be paid directly from general assets of the employer in order to ensure that it is considered an unfounded liability per ERISA.
• The TPA will reimburse claims to employees on a weekly basis after funds are received from the employer. HRA maximum amount is not available to the employee for claims reimbursement until funds are available in the HRA, unlike the FSA Health Accounts.

Minimum HRA employer funding of the lesser of 25% of the individual deductible or $500 is required. Owners and Key Employees may not be eligible. Plans include the base medical plus administration of HRA accounts, including debit cards, through a third party administrator. Fees cover the production of plan documents and onsite meetings. Fees may vary for groups with more than two locations in Oregon.