10 Customization Questions When Building Your HRA

March 13, 2019

Businesses are recognizing the demand for customization from consumers. So it’s no surprise that they’re also seeking a customized experience when providing healthcare savings to their employees. Health Reimbursement Arrangement (HRA) participation is booming, as employers seek to best fit the needs of their business and employees. So what options do you have when building one? We’ve compiled answers to 10 common HRA questions you may have. 

HRA customization options

Who is it being set up for?

Health Reimbursement Arrangements can be set up for a variety of groups, including:

  • Employees and their families (spouses and eligible dependents)
  • Employees only
  • Retirees

What expenses are covered?

HRAs differ from Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) because expenses are determined by the employer (while IRS Code Section 213(d) determines HSA and FSA expense eligibility). Some employers stick with 213(d) expenses for their HRAs, while others include or exclude other expenses. However, some restrictions or conditions may apply when including non-213(d) eligible expenses.

How much do I set aside in funds for my employees?

Like with other pre-tax benefits plans, you decide the amount of funds to make available to your employees. Many types of HRAs do not have contribution limits, but the IRS does set limits for Qualified Small Employer HRAs (QSEHRAs). In 2019, QSEHRA contribution limits are $5,150 for a single employee and $10,450 for family.

Is there an out-of-pocket threshold?

You can require your employees to meet an out-of-pocket threshold before they can spend arrangement funds. For example, if you set a $1,000 out-of-pocket threshold, your employees must spend $1,000 out of their own pockets before they can use any funds you’ve contributed.

You can also set a per-member threshold that requires each person covered by the employee’s HRA (their spouse or their dependents) to meet their own threshold before that individual can spend funds.

Are there individual reimbursement limits?

You can set a per-member reimbursement limit. With a per-member reimbursement limit, the employee, his/her spouse and any dependents each have their own access to a certain amount of funds rather than being able to access the employee’s entire pool of funds.

When are funds available?

You determine how frequently funds are available to your employees. Common time frames are:

  • At the start of the plan year, upon eligibility or after an established threshold has been met
  • Monthly
  • Quarterly
  • Daily (variable)

What options do I have to provide a carryover?

Providing a carryover gives employees increased flexibility and peace of mind, since they won’t have to worry about spending all of their funds by a certain time. You can decide if the carryover is based on:

  • A fixed dollar amount
  • Percentage of balance
  • Remaining balance

The limit of a carryover is completely up to you (as opposed to an FSA, which is limited to no more than a $500 carryover). You also decide which participants (active, terminated or both) are eligible to carry over funds.

What does it mean to provide a run-out period?

A run-out period gives your employees extra time to submit claims for reimbursement once your plan year has ended. With an HRA, you determine whether to include a run-out period and how long the run-out is (typically, it’s 90 days past the end of the plan year). 

Should I offer a debit card?

Debit cards make it easy for your employees to spend their funds. However, the way your arrangement is built will determine whether or not you have the option to make a debit card available. For example, if you offer an HRA through Discovery Benefits and set a per-member reimbursement limit, then offering a Discovery Benefits debit card is not an option since the debit card can’t determine who is spending the funds when the debit card is used.

Will the HRA I offer integrate with my insurance?

Some types of Health Reimbursement Arrangements can be integrated with the health insurance plan you offer your employees (QSEHRAs and retiree HRAs can’t be integrated). With an integrated HRA:

  • The employee must be covered by a health insurance plan.
  • The employee then uses their health insurance and the arrangement to help manage their healthcare costs.

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