Health Reimbursement Arrangement

HRAs can vary greatly in design, but are developed basically for the same purpose; to reimburse employees tax-free for expenses not covered by the employer’s health plan.

Health Reimbursement Arrangement

Health reimbursement arrangements (HRAs) are tax-advantaged accounts that are funded with employer dollars to pay employee expenses not covered by their health plan. The employer outlines what expenses will be covered in the HRA summary plan document within the limitations outlined by the Internal Revenue Service Publication 969. For example, an HRA could pay all eligible medical expenses, or the HRA could be limited to cover only dental or vision expenses. Although an HRA can have an option to carry forward unused funds to the future or for retirement, an employee cannot take their HRA funds to a new employer. HRAs can vary greatly in design, but are developed basically for the same purpose; to reimburse employees tax-free for expenses not covered by the employer’s health plan.

On average employers save over 20% on their overall healthcare costs while maintaining benefits and containing costs. OCA’s HRA utilization last year was just under 30%. The industry average is just over 40% HRA utilization. We believe this is due to our investment to employee education and compliant administration! Typically, an employer creates a notional (unfunded) arrangement for each participating employee, which OCA then uses to reimburse the employee for substantiated, qualified healthcare expenses. Unlike an HSA, employers will only have to fund for valid claims incurred. The rest of the money never leaves the employers bank account! It’s a win/win!

What We Can Do

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Full Service Administration

  • Automate Employee Reimbursement (ClaimsExpress)
  • Provide Plan Document and SPD
  • Conduct 105(h) Non- Discrimination Testing
  • PCORI Fee Reporting
  • Online/Mobile Access

Integrated Debit Card

  • Single-Source Card for HRA/FSA/Commuter/HSA
  • Separate cards (if requested) for each benefit
  • Pay a set copay for Office Visits/Prescriptions
  • Pay a percentage for Prescriptions
  • Auto-resolve card transactions

Complex HRA Plan Design

  • Non-Embedded/Embedded Deductibles
  • Differentiated Co-pays Reimbursement
  • Defined Copay Reimbursement
  • Doughnut hole Reimbursement
  • Percentage Payouts
  • Variable Employee/Employer Responsibility

Are your employee’s tired of submitting claims for reimbursement?

OCA’s ClaimsExpress™ automates the employee claim filing experience by linking to your insurance carrier portal! Once the accounts are linked, ClaimsExpress™ will automatically retrieve any new EOBs issued by the insurance company. This can significantly reduce or even eliminate the need to file paperwork to get reimbursed from your HRA benefit.

Frequently Asked Questions

HRAs can vary greatly in design, dollar amount, and services. Employers should be fully aware of all the complexities that the HRA has to offer. Should your questions not be answered here, please contact OCA directly.

Can the HRA allocation be set up on a 4-tier structure?

Yes. You may set up the HRA allocation for employee, employee+spouse, employee+child(ren), or family.

Can owners or partners participate in an HRA?

No. According to IRS guidelines, anyone with two-percent or more ownership in a schedule S corporation, LLC, LLP, PC, sole proprietorship, or partnership may not participate. C-corporation owners and their families are eligible to participate in HRA plans because they are considered to be W-2 common law employees.

What is the tax benefit for me as an employer?

Employers can deduct the amount of their contributions. Since the account is funded on a “notional” basis like a line of credit, the employer can take the deduction only when the amounts are actually paid out.

Are high-deductible health plans required in order to offer an HRA?

No. The HRA can be paired with any health plan; there are no limitations.

Is there a tax benefit for my employees?

Yes. HRA funds are contributed to employees on a pre-tax basis; therefore, disbursements are not included when calculating taxable income. For this reason, employees can not claim an income tax deduction for an expense that has been reimbursed under the HRA.

Do employers have to contribute the same amount to every employee’s HRA?

Yes, according to Federal regulations, employer contributions must be comparable, that is they must be in the same dollar amount for all employees with the same category of coverage. You can vary the level of contributions for full-time vs. part-time employees. There may be other variations around comparability. Consult your tax advisor for additional information.

Still have questions?

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