An HRA is type of Medical Reimbursement Plan (MRP) that enables employers to fund portions of their employees' health plan deductibles and help cover the cost of other qualified medical expenses on a tax-free basis. HRAs are typically combined with a High Deductible Health Plan (HDHP). Employers and employees both benefit greatly by HDHPs. HDHPs reduce employer expenses by lowering the amount they spend on health insurance premiums. With the employer spending less money on insurance premiums, they can put more money back into their employees' pockets in the form of HRA contributions.

For employers looking to save money, HRAs are often a better choice than funding a Health Savings Account (HSA) which in reality is a cash contribution to participants. A properly implemented HRA allows employers greater control of their benefit dollars, and they can be coordinated and integrated with Flexible Spending Accounts (FSAs).

How an HRA Works

There is no physical account with an HRA. Rather, the employer makes a commitment to have funds available to employees. Only the employer can add contributions to the HRA, and an employee only receives reimbursement after they submit a claim to eBenefits Administrators.

Benefits

HRAs benefit employers and employees in many ways: Tax Savings Reimbursements to employees are tax-exempt, and contributions made by the employer are tax-deductible business expenses. However, a tax deduction can only be claimed by the employer once a claim has been reimbursed. Roll-Over Options The employer may allow 100% of funds to roll-over year after year, or they may allow a certain percentage, a set maximum amount or no funds to accumulate. Spend-Down Options HRAs are not portable, so an employee cannot take an account with them if they start a new job. However, the employer may allow an employee spend-down options in the event of job termination due to layoff, death or disability. The employer may also specify a set time frame where the employee has access to their HRA, such as 90 or 180 days. Note: HRAs are subject to COBRA regulations which require most employers who sponsor group health plans to offer employees and their families the right to continue group health plan coverage if coverage is lost due to certain qualifying events. It's very important the employer links the HRA to the health plan, so the employee cannot elect COBRA for the HRA without electing COBRA for the health plan as well. Flexibility Funds can be used to pay for a variety of medical expenses not covered by the health plan including deductibles, copayments, prescriptions, over-the-counter drugs and dental and vision care. In addition, most HRAs do not require a specific deductible amount, and they can be used with any type of HDHP, unlike a Health Savings Account. Note: As of January 1, 2011, HRA funds can no longer be used to purchase over-the-counter medicines and drugs unless the medicine or drug is prescribed. Control The employer decides exactly how much money will be available to employees and how it will be disbursed. For example, funds may only become available to employees after they pay a certain percentage of their deductible, or funds may be available right from the start. Freedom Employers can set up and/or change insurance plans without changing their HRA administrator or custodian, since eBenefits Administrators is an independent administrator.

Plan Types

There are four primary types of HRAs: 1. Bridge This plan only funds expenses applied to the health plan deductible and provides a ÒbridgeÓ between an employee's out-of-pocket expenses and their insurance coverage. Bridge HRAs are incredibly versatile in plan design. Here are some examples: 2. Comprehensive This plan can be used to fund all medical expenses not covered by the health plan including deductibles, copayments, prescriptions, over-the-counter drugs and dental and vision care. Any expense eligible for reimbursement under Section 213 (d) of the Internal Revenue Code is covered by a Comprehensive HRA. 3. Limited-Purpose This plan can be used to fund specific expenses such as dental or vision care. For example, a dental Limited-Purpose HRA may be set up with a maximum calendar year benefit of $1,000. The plan may pay 100% of the first $200 in expenses, 80% of the next $600 ($480 benefit) and 50% of the next $640 ($320 benefit). The maximum benefit and percentage amounts can be whatever the employer chooses. A vision Limited-Purpose HRA is normally set up with a specific flat-dollar contribution, such as $150. 4. Post-Deductible This plan must be combined with a qualified HDHP and a Health Savings Account. Post-Deductible HRAs only reimburse expenses once the Health Savings Account reimburses the minimum required deductible for the qualified HDHP. Due to the escalating cost of health care premiums, this type of HRA is gaining popularity with employers looking for an additional way to save money. Under Federal law, a qualified HDHP must have the following characteristics when used with a Post- Deductible HRA: 2012 Minimal Deductible: $1,200 Individual (Self-Only) Coverage / $2,400 Family Coverage 2012 Maximum Out-of-Pocket Limit: $5,950 Individual (Self-Only) Coverage / $11,900 Family Coverage

Coverage Levels

Employers may base contributions on one of three coverage levels: 1. Single-Tier The maximum employer contribution is the same for employees with individual or family coverage. 2. Two-Tier Different maximum employer contributions are set for employees with individual or family coverage. The two-tier approach is typically used with Comprehensive HRAs. For example, the employer may allow a maximum calendar year benefit of $750 for employees with individual coverage and $1,500 for employees with family coverage. 3. Three-Tier Different maximum employer contributions are set for employees with individual, two-party or full-family coverage. Two-party coverage may be for an employee and their child or an employee and their spouse. Families of three or more receive full-family coverage.

Debit Card Access

Our optional debit card, the mySourceCard® MasterCard® Debit Card, takes funds directly from an established account to pay for eligible out-of-pocket expenses at any qualified service provider that accepts MasterCard®. Transactions post online instantly, eliminating the hassle of claim forms and reimbursement checks and, in most cases, the need to submit receipts. In order to use the mySourceCard with any type of HRA, the health plan deductible (or a portion of it) must be 100% funded, as the card cannot reimburse a percentage of a claim. With Bridge HRAs, only prescription drug expenses can be paid for using the Card and only when real-time data matching at the point-of-sale is available. Click here for more information. With Comprehensive HRAs, all medical expenses listed under Section 213 (d) of the Internal Revenue Code can be paid for using the Card. Click here to download a list of eligible expenses in PDF format. With Limited-Purpose HRAs, only eligible dental or vision care expenses covered under the Limited-Purpose HRA can be paid for using the Card. The Card is not recommended for use with a Post-Deductible HRA.

Comprehensive Administration

eBenefits Administrators provides complete, comprehensive administration of HRA services. Our experienced team effortlessly navigates the complex world of HRAs, taking care of enrollment, account set-up, implementation, education, staff training and account administration with a variety of reimbursement options. Before an HRA is implemented, we make certain the plan passes discrimination testing as required by the IRS. We perform this testing throughout the year to account for the addition and deletion of employees for consistent plan maintenance. We also provide an employer with all the necessary legal documentation they need to ensure the plan is IRS compliant. Most importantly, we give employees the personalized support they need to understand and utilize all of the advantages an HRA offers. An employee can simply pick up the phone or email us any time they have a question or concern. Contact us today to learn more.