How do HRAs work?
October 2, 2017 | Tina PellandWhen choosing to self-fund employee benefits, employers will choose a type of Medical Expense Plan. One of the more popular choices is an HRA or Health Reimbursement Arrangement.
What is an HRA?
A Health Reimbursement Arrangement is a self-funded account that allows employers to contribute to their employee’s medical costs. Each year, companies set aside pre-taxed funds, covering plan participant’s expenses like copays, prescriptions, dental, vision or whatever else is predetermined by employers. An HRA is comparable to an FSA (Flex Spending Account ) or HSA (Health Savings Account). The major difference being that an HRA technically is not an account, but a reimbursement agreement, that is entirely funded by the employer.
What are the benefits of using an HRA for Employers?
By using an HRA, employers can use high-deductible insurance plans, while helping employees with more routine medical expenses and providing sought-after work incentives. The funds used to for an HRA have no expiration date, so if funds go unused they roll-over to the next year. Also, the amount set aside for each employee does not have to be paid out upon termination, ensuring that if and when an employee leaves a company, the funds stay. Providing an HRA also provides substantial tax breaks for employers and for the employees who use them.
How does a TPA help with an HRA?
TPAs, like Varipro, help employers determine the proper amount to set aside per employee, choose coverages, administer reimbursements, and ensure that the HRA is following IRS guidelines. TPAs will also review coverages and expenses, ensuring the proper use of funds and catching overages.