HEALTH REIMBURSEMENT ARRANGEMENTS

HRA POWERPOINT PRESENTATION

In the current health care marketplace, striking a balance between what your employees want and what you as an employer can provide is difficult at best. Employers of all sizes and industries are looking to Health Reimbursement Arrangements (HRAs) as an opportunity to serve the needs of their employees, and fight back against the backlash of rising health care costs.

An HRA is an arrangement that is paid solely with employer’s money and reimburses qualified health expenses including health insurance premiums, for current, former or retired employees including spouses and dependents. The remarkable feature of the HRA is that any unused funds are carried forward to future years allowing employees to build a fund for future use.

The HRA is designed to operate with a high deductible health insurance policy, thereby reducing premium costs while encouraging the employees to spend wisely and save their medical dollars. The HRA may also be used to allow their employees to make their own decisions about their health care situation and limit the employer’s health care liability to their HRA contribution.

How Does Your Organization Benefit From Health Reimbursement Arrangements?

Comparison Chart of Flexible Spending Accounts (FSAs) with Health Reimbursement Arrangements (HRAs)
Questions	FSAs	HRAs
May employees make pre-tax salary reduction contributions?	YES.	NO. Coverage must be paid for solely by the employer. Salary redirection contributions (either directly to the HRA or indirectly to another arrangement) are strictly prohibited.
May unused coverage be carried over to subsequent tax years?	NO. Unused coverage must be forfeited at the end of the coverage period (which is typically a calendar year).	YES. Unused coverage can be carried over to subsequent coverage periods, even if the coverage is in a subsequent tax year. Coverage carried over may increase the coverage limit available in subsequent periods.
Must the arrangement have a specified period of coverage?	YES.	NO. There is no required period of coverage. Employers are free to fashion their own coverage periods. For example, separate coverage periods could be offered each calendar quarter.
What type of expenses may be reimbursed?	Any type of expense for medical care as that term is defined under applicable tax laws. No reimbursement is permitted for premium payments for other health coverage.	Same types of medical expenses that are reimbursable under FSAs are reimbursable under HRAs. Unlike FSAs, however, premium payments for other health coverage are reimbursable. For example,an HRA could be used to pay premiums under a spouse's health plan or pay premium's for coverage under the employer's retiree medical plan.
May premiums for long-term care insurance be reimbursed under the arrangement?	NO	YES
Who is entitled to receive reimbursement?	Current and former employees, their spouses and dependents ( as defined under applicable tax laws), and the spouse and dependents of deceased employees. Self-employed persons cannot be covered.	Same.
Must the maximum amount of reimbursement permitted under the arrangement be available at all times?	YES. The FSA must have a risk-shifting element that makes the full amount of coverage available even if the reimbursement exceeds the participant's actual contributions to the plan at the time of reimbursement.	NO
Can medical expenses incurred outside of the period of coverage be reimbursed?	NO	Yes, (1) if the claim was incurred after the HRA was put into effect, and (2) the individual was covered under the HRA at the time the claim was incurred.
Do the tax rules prohibiting discrimination in favor of Key Employees and Highly compensated employees apply.	YES. The arrangement cannot discriminate (either in for or operation) with respect to eligibility for coverage or for the reimbursement benefits provided.	Same as for FSAs Key Employee & Highly Compensated Employee Defined