Health Reimbursement Arrangement

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A Health Reimbursement Arrangement (HRA) is an IRS approved tax-favored benefit, exclusively funded by the employer, which reimburses employees for qualified medical care expenses not reimbursed under other plans. FBMC’s PremierHRA offers employers the greatest flexibility in plan design, regardless if coordinated with a medical plan, stand alone or limited in scope. All parameters are defined in the plan document. Participants can be reimbursed for qualified expenses via direct deposit, payment card or check.

Why Employers Like HRAs:

Employers enjoy numerous perks that make HRAs an attractive benefit option:

• Control of the eligible items for reimbursement list (beyond those covered by any health plan their Employee has). For instance, one Employer may choose to limit their HRA to reimburse only copays, while another Employer may allow their HRA to reimburse copays, deductibles and other services.
• All qualified claim reimbursements are tax-deducible for the Employer.
• Lower medical plan rates when paired with an HRA (generally a High Deductible Health Plan).
• May establish a “vesting” plan for HRAs. These plans establish rules and timelines for when and how an Employee qualifies fully for an HRA. They also determine what will happen to the Employee's HRA funds if they leave employment prior to completion of the vesting period.

Why Employees Like HRAs:

Employees have many incentives for participating in an HRA:

• HRAs are fully funded by the Employer; no employee funds are necessary.
• Funds left in an HRA at the end of a plan year are carried over into the new plan year.

Example: An Employer contributes $1,000 a year towards an HRA. Their Employee spends $500 of that on eligible expenses during the plan year. The next year they have $1,500 to use toward eligible expenses.

• Depending on the type of plan the Employer offers, HRAs can also be used in conjunction with both Medical Flexible Spending Accounts and Health Savings Accounts.

Types of HRAs:

There are several different types of HRAs that an Employer may choose to offer their Employees.

1. Medical – The Medical HRA must be paired with a health plan, which the HRA will then mirror to compliment the plan. The Employer may set specific limits on the eligible expenses for reimbursement in order to encourage participation. For this reason, a Medical HRA is often paired with a High Deductible Health Plan (HDHP).
2. Stand-alone – Stand-alone HRAs are similar to Medical HRAs, with the key exception being that they do not have to be tied to a health plan.
3. Limited Purpose – A Limited Purpose HRA may only be offered alongside a Health Savings Accounts (HSAs), and may only reimburse eligible dental and vision expenses.
4. Post-deductible – The Post-deductible HRA is tied to an HDHP, however, it does not begin reimbursing eligible expenses until the Employee meets the HDHP’s deductible first. This type of HRA has been gaining popularity recently with Employers because there are no HRA expenses to be reimbursed until the Employee meets their deductible.
5. Suspended – Suspended HRAs are another option for Employers offering HSAs but do not cover any expenses as long as the Employee remains covered by another plan (such as an HSA). The benefit of this HRA is that it offers coverage after retirement to reimburse all eligible expenses – including premiums!
6. Funded – A Funded HRA is similar to a Suspended HRA in that the funds cannot be accessed until after retirement. However, a Funded HRA pools the Employees account balances into a Trust account. The Trust is then able to invest that entire pool so that the funds gain interest, which is then added to the sum balance.
7. Retiree – The Retiree HRA funds become available to Employees once they retire or terminate employment. There is usually a vesting schedule and eligibility requirements that must be met (for example, two years of active employment) before an Employee is able to participate.