Maximizing Benefits with HRAs

1. Maximizing Benefits with HRAs

2. (c) 2002 MHM Business Services, Inc. Maximizing Benefits Rising healthcare costs Competing for employees Owners needs Business owners have many concerns these days. The growing cost of health care, competing for and retaining good employees, and their own family’s healthcare needs.Business owners have many concerns these days. The growing cost of health care, competing for and retaining good employees, and their own family’s healthcare needs.

3. (c) 2002 MHM Business Services, Inc. Creativity Counts Section 125 Flexible Spending Account (FSA) Medical Savings Account (MSA) Health Reimbursement Arrangement (HRA) As an advisor, it used to be enough to introduce a Section 125 Cafeteria Plan to an employer. The employer and his employees save tax dollars on expenses such as employer-sponsored insurance premiums, dependent daycare expenses, and unreimbursed medical expenses. Generally these plans are called Flexible Spending Accounts, or FSAs. Medical Savings Accounts (MSAs) were introduced in 1997 – but they could be utilized by only a small portion of the business community. Then in June, 2002, the IRS released guidance related to Health Reimbursement Arrangements (HRAs). Let’s look at a typical, small business and see how an HRA plan can deliver more benefits to owners and key employees.As an advisor, it used to be enough to introduce a Section 125 Cafeteria Plan to an employer. The employer and his employees save tax dollars on expenses such as employer-sponsored insurance premiums, dependent daycare expenses, and unreimbursed medical expenses. Generally these plans are called Flexible Spending Accounts, or FSAs. Medical Savings Accounts (MSAs) were introduced in 1997 – but they could be utilized by only a small portion of the business community. Then in June, 2002, the IRS released guidance related to Health Reimbursement Arrangements (HRAs). Let’s look at a typical, small business and see how an HRA plan can deliver more benefits to owners and key employees.

4. (c) 2002 MHM Business Services, Inc. Owners Needs Annual Insurance Premiums 5 owners 10 employees $24,500 - owners premiums, 100% employer paid $36,000 - employee premiums of which the employer pays 80%, or $28,800 This small business has 5 owners and 10 other employees. The corporation pays all the owners’ premium costs for health insurance and 80% of the employees’ costs. The corporation is currently paying $53,300 for health coverage. This small business has 5 owners and 10 other employees. The corporation pays all the owners’ premium costs for health insurance and 80% of the employees’ costs. The corporation is currently paying $53,300 for health coverage.

5. (c) 2002 MHM Business Services, Inc. Owners Needs Medical Expenses $25,000 - owners $ 5,700 - employees And we all know that insurance premiums are not the only medical costs that people incur. There are co-pays and deductibles, co-insurance, and medical expenses not covered by insurance. When this company was surveyed, the owners estimated they would have at least $25,000 in out-of-pocket medical expenses for the coming year. The 10 employees estimated they would spend $5,700 for their out-of-pocket medical expenses.And we all know that insurance premiums are not the only medical costs that people incur. There are co-pays and deductibles, co-insurance, and medical expenses not covered by insurance. When this company was surveyed, the owners estimated they would have at least $25,000 in out-of-pocket medical expenses for the coming year. The 10 employees estimated they would spend $5,700 for their out-of-pocket medical expenses.

6. (c) 2002 MHM Business Services, Inc. Owners and Employees Needs Add it all together, and the owners’ medical needs of $49,500 exceed those of the rank-and-file by quite a margin. So, how can we design a plan that maximizes the benefits going to the owners? Which type of plan can allow the owners to pay all their medical expenses with untaxed dollars? Let’s take a look at a Section 125 Cafeteria Plan first.Add it all together, and the owners’ medical needs of $49,500 exceed those of the rank-and-file by quite a margin. So, how can we design a plan that maximizes the benefits going to the owners? Which type of plan can allow the owners to pay all their medical expenses with untaxed dollars? Let’s take a look at a Section 125 Cafeteria Plan first.

7. (c) 2002 MHM Business Services, Inc. Small Employer Cafeteria Plan Example fails the 25% concentration test with 54% of the benefits going to owners $49,500/$91,200 Exclude insurance premiums paid by the corporation – 65% of the benefits going to owners $25,000/$37,900 Since the owners, who are also “key employees” want to pay for $49,500 of unreimbursed medical expenses and insurance premiums through the cafeteria plan, and the employees only need $41,700 worth of coverage; this cafeteria plan would not pass the 25% concentration test. The “25% concentration” test is spelled out in Internal Revenue Code Section 125 and states that “key” employees may not receive more than 25% of the total benefits received from the plan. Let’s say we have the corporation pay all the owners’ insurance premiums and 80% of the employees’ premiums. Still won’t satisfy the “25% concentration test” with 65% of the benefits going to the owners. The owners could receive only a small benefit by establishing this type of plan.Since the owners, who are also “key employees” want to pay for $49,500 of unreimbursed medical expenses and insurance premiums through the cafeteria plan, and the employees only need $41,700 worth of coverage; this cafeteria plan would not pass the 25% concentration test. The “25% concentration” test is spelled out in Internal Revenue Code Section 125 and states that “key” employees may not receive more than 25% of the total benefits received from the plan. Let’s say we have the corporation pay all the owners’ insurance premiums and 80% of the employees’ premiums. Still won’t satisfy the “25% concentration test” with 65% of the benefits going to the owners. The owners could receive only a small benefit by establishing this type of plan.

8. (c) 2002 MHM Business Services, Inc. HRA Employer contribution Employer makes $3,600 available to each employee and owner for medical expenses Employer spends: $18,000 for owners $36,000 for employees So let’s look at a Health Reimbursement Arrangement – an HRA. An HRA is an employer-funded account that allows for reimbursement of eligible medical expenses. The employer launches an HRA and makes $3,600 available to each employee and owner for unreimbursed medical expenses. This plan will cost the corporation $18,000 for owners and $36,000 for all other employees. Now, before you tell me that I can’t do math, and that the corporation is spending more money instead of less – let’s see how these dollars are utilized.So let’s look at a Health Reimbursement Arrangement – an HRA. An HRA is an employer-funded account that allows for reimbursement of eligible medical expenses. The employer launches an HRA and makes $3,600 available to each employee and owner for unreimbursed medical expenses. This plan will cost the corporation $18,000 for owners and $36,000 for all other employees. Now, before you tell me that I can’t do math, and that the corporation is spending more money instead of less – let’s see how these dollars are utilized.

9. (c) 2002 MHM Business Services, Inc. HRA Employees utilize their HRA to pay for insurance premiums Employees use any surplus for medical expenses Remainder of expenses through FSA If you can imagine the employer delivering a “bucket of money” to each person’s desk – I’ll show you how each employee will spend their cash. The employees must use their cash for insurance premiums first. Remember – the employees’ premiums were $36,000 and the employer was paying $28,800 of the tab. Now the employees are expected to pay their insurance premiums in full by using their “bucket” of money . Since everyone is different, some employees will spend more than $3,600 for premiums and unreimbursed medical expenses. Those employees would use the cafeteria plan to pay these extra expenses. Other employees would not spend the entire $3,600 for insurance premiums. The money left over in their “bucket” after paying premiums could be used for their unreimbursed medical expenses.If you can imagine the employer delivering a “bucket of money” to each person’s desk – I’ll show you how each employee will spend their cash. The employees must use their cash for insurance premiums first. Remember – the employees’ premiums were $36,000 and the employer was paying $28,800 of the tab. Now the employees are expected to pay their insurance premiums in full by using their “bucket” of money . Since everyone is different, some employees will spend more than $3,600 for premiums and unreimbursed medical expenses. Those employees would use the cafeteria plan to pay these extra expenses. Other employees would not spend the entire $3,600 for insurance premiums. The money left over in their “bucket” after paying premiums could be used for their unreimbursed medical expenses.

10. (c) 2002 MHM Business Services, Inc. HRA Employer continues to pay insurance premiums for owners Owners have $18,000 for medical expenses Remainder of expenses through FSA How will the owners use their HRA dollars? Well, the corporation is going to continue to pay the insurance premiums for them. That means that each one of their “buckets” is still stuffed with $3,600. The owners have enough nontaxable dollars to pay for their medical needs and might have some left over. Depending on the HRA plan design – the unused money can roll forward from year to year. Or, they could purchase long-term care insurance from the HRA fund.How will the owners use their HRA dollars? Well, the corporation is going to continue to pay the insurance premiums for them. That means that each one of their “buckets” is still stuffed with $3,600. The owners have enough nontaxable dollars to pay for their medical needs and might have some left over. Depending on the HRA plan design – the unused money can roll forward from year to year. Or, they could purchase long-term care insurance from the HRA fund.

11. (c) 2002 MHM Business Services, Inc. HRA Is there an additional cost to the corporation? The corporation is only spending $7,200 more for all 10 employees, while it is paying out $18,000 more for its 5 owners. Thereby maximizing untaxed dollars delivered to the owners and key employees.Is there an additional cost to the corporation? The corporation is only spending $7,200 more for all 10 employees, while it is paying out $18,000 more for its 5 owners. Thereby maximizing untaxed dollars delivered to the owners and key employees.

12. By now, you might be asking yourself how this seemingly magic HRA works and why the IRS allows such a plan. An HRA is regulated under the same code section as the unreimbursed medical account inside of a Section 125 Plan. It’s the same code section that governs self –funded insurance plans. It is Internal Revenue Code Section 105. This is the exclusion from income for “medially necessary” healthcare expenses. Are there discrimination tests associated with Code Section 105 like the Section 125 Plan 25% concentration test? Good question – here’s what IRC Section 105 has to say about discrimination.By now, you might be asking yourself how this seemingly magic HRA works and why the IRS allows such a plan. An HRA is regulated under the same code section as the unreimbursed medical account inside of a Section 125 Plan. It’s the same code section that governs self –funded insurance plans. It is Internal Revenue Code Section 105. This is the exclusion from income for “medially necessary” healthcare expenses. Are there discrimination tests associated with Code Section 105 like the Section 125 Plan 25% concentration test? Good question – here’s what IRC Section 105 has to say about discrimination.

13. (c) 2002 MHM Business Services, Inc. Section 105 Discrimination Rules Discriminatory Operation Test Classification Test OR Percentage Test Benefits Available Test Here are the four discrimination tests found in IRC Code Section 105. The Discriminatory in Operation Test, the Classification Test, the Percentage Test, and the Benefits Available Test. Short answer? Make all the same benefits available, in the same manner and amount to all employees. That means – all employees receive a “bucket of money” and each “bucket” contains the same amount of money. Of course, there are exceptions and exclusions that can apply, but we can discuss those when we’re designing your plan.Here are the four discrimination tests found in IRC Code Section 105. The Discriminatory in Operation Test, the Classification Test, the Percentage Test, and the Benefits Available Test. Short answer? Make all the same benefits available, in the same manner and amount to all employees. That means – all employees receive a “bucket of money” and each “bucket” contains the same amount of money. Of course, there are exceptions and exclusions that can apply, but we can discuss those when we’re designing your plan.

14. (c) 2002 MHM Business Services, Inc. COBRA and HIPAA HRAs are subject to COBRA continuation rules like health insurance policy And, while we’re at it, I’ll share some additional legal restrictions. Each employee’s HRA account is subject to COBRA continuation just like your health insurance coverage. That means when an employee terminates employment and has money left in their HRA, that you must allow them to continue to participate in the HRA for a specified period of time. Generally COBRA applies to companies that have more than 20 employees. And, while we’re at it, I’ll share some additional legal restrictions. Each employee’s HRA account is subject to COBRA continuation just like your health insurance coverage. That means when an employee terminates employment and has money left in their HRA, that you must allow them to continue to participate in the HRA for a specified period of time. Generally COBRA applies to companies that have more than 20 employees.

15. (c) 2002 MHM Business Services, Inc. COBRA and HIPAA HIPAA Certification of Credible Coverage Security Privacy Electronic Data Interchange (EDI) The Health Insurance Portability and Accountability Act (HIPAA) rules also apply to an HRA. You must supply a Certificate of Creditable Coverage to terminating employees and bear in mind the newest security, privacy, and Electronic Data Interchange (EDI) rules.The Health Insurance Portability and Accountability Act (HIPAA) rules also apply to an HRA. You must supply a Certificate of Creditable Coverage to terminating employees and bear in mind the newest security, privacy, and Electronic Data Interchange (EDI) rules.

16. (c) 2002 MHM Business Services, Inc. HRA Plan Designs Bridge Comprehensive Limited Insurance Only Now that the legalese is behind us, I want to show you how HRAs can work for you. We’re going to talk about four plan designs that provide four different kinds of coverage and work to attain your healthcare goals. The four plan designs we will address are: Bridge plans, Comprehensive plans, Limited plans, and finally Insurance Only plans. We’ll look at “Bridge” plans first.Now that the legalese is behind us, I want to show you how HRAs can work for you. We’re going to talk about four plan designs that provide four different kinds of coverage and work to attain your healthcare goals. The four plan designs we will address are: Bridge plans, Comprehensive plans, Limited plans, and finally Insurance Only plans. We’ll look at “Bridge” plans first.

17. (c) 2002 MHM Business Services, Inc. Bridge Plan Combined with higher-deductible insurance product Combined with limited-coverage insurance product An HRA Bridge Plan combines the HRA fund with a higher-deductible or limited-coverage insurance product. Let’s say you choose a higher-deductible insurance policy to reduce overall premiums. With the savings, an HRA can be created for every employee. Instead of a $500 deducible, the employee now faces a $1,500 out-of-pocket expense for the year. The HRA is there to make the employee “whole.” In other words, if the employee reaches the insurance deductible limit and has to pay $1,500 – the HRA could cover $1,000 worth of expenses and the employee would be liable for $500. The same amount if he were still covered by the lower-deductible plan.An HRA Bridge Plan combines the HRA fund with a higher-deductible or limited-coverage insurance product. Let’s say you choose a higher-deductible insurance policy to reduce overall premiums. With the savings, an HRA can be created for every employee. Instead of a $500 deducible, the employee now faces a $1,500 out-of-pocket expense for the year. The HRA is there to make the employee “whole.” In other words, if the employee reaches the insurance deductible limit and has to pay $1,500 – the HRA could cover $1,000 worth of expenses and the employee would be liable for $500. The same amount if he were still covered by the lower-deductible plan.

18. (c) 2002 MHM Business Services, Inc. Bridge Plan Deductible + “Bridge” = $1,500 “Bridge” + Deductible = $1,500 “Bridge” may be designated to be used only for deductible, co-pays, or a limited list of expenses The HRA “bridge” could kick in only after the employee pays their share of the deductible or before the employee has any deductible expenses to pay. And, the plan can be designed to pay only those expenses that are considered deductible items or co-pays under the health insurance policy. This HRA would not pay for glasses, contact lenses, or other unreimbursed medical expenses.The HRA “bridge” could kick in only after the employee pays their share of the deductible or before the employee has any deductible expenses to pay. And, the plan can be designed to pay only those expenses that are considered deductible items or co-pays under the health insurance policy. This HRA would not pay for glasses, contact lenses, or other unreimbursed medical expenses.

19. (c) 2002 MHM Business Services, Inc. Comprehensive Plan Covers all medically necessary expenses as outlined in IRC Section 213(d) Could exclude “big ticket” items like LASIK surgery or orthodontia The “Comprehensive Plan” is just what the names implies. This HRA would pay for all medically necessary expenses as outline in Internal Revenue Code Section 213(d). These are the same expenses that you could deduct from your income taxes – if you spent more than 7 ½ % of your adjusted gross income! These are also the same healthcare expenses allowed for reimbursement through a Section 125 Cafeteria Plan. Although the Comprehensive HRA Plan could pay all types of expenses, you could exclude some big-ticket items like LASIK eye surgery or orthodontia from your plan. The “Comprehensive Plan” is just what the names implies. This HRA would pay for all medically necessary expenses as outline in Internal Revenue Code Section 213(d). These are the same expenses that you could deduct from your income taxes – if you spent more than 7 ½ % of your adjusted gross income! These are also the same healthcare expenses allowed for reimbursement through a Section 125 Cafeteria Plan. Although the Comprehensive HRA Plan could pay all types of expenses, you could exclude some big-ticket items like LASIK eye surgery or orthodontia from your plan.

20. (c) 2002 MHM Business Services, Inc. Limited Plan Designed to cover only one or two medical expenses like vision or dental Additional benefit offering “Plugs” the holes in a limited-coverage insurance product Limits the employer’s liability The Limited HRA Plan is designed to cover only one or two medical expenses like vision or dental. This HRA could be an additional benefit provided by you, the employer. The Limited Plan could also pay for expenses not covered by your employer-sponsored policy. This type of plan also limits your liability by not covering medical expenses like LASIK eye surgery, prescription sunglasses, or other discretionary healthcare expenses.The Limited HRA Plan is designed to cover only one or two medical expenses like vision or dental. This HRA could be an additional benefit provided by you, the employer. The Limited Plan could also pay for expenses not covered by your employer-sponsored policy. This type of plan also limits your liability by not covering medical expenses like LASIK eye surgery, prescription sunglasses, or other discretionary healthcare expenses.

21. (c) 2002 MHM Business Services, Inc. Insurance Only Allows employers to deliver a specified contribution for insurance coverage And finally – the Insurance Only HRA Plan allows employees to pay for insurance coverage premiums from the plan. This could include employer-sponsored insurance or individually owned policy premiums.And finally – the Insurance Only HRA Plan allows employees to pay for insurance coverage premiums from the plan. This could include employer-sponsored insurance or individually owned policy premiums.

22. (c) 2002 MHM Business Services, Inc. Defined Contribution Approach Hand over the “keys to the car” Fixed dollar amount to each employee Each employee determines their own needs and applies $ where needed Left over funds may accumulate from year to year The HRA is a defined contribution approach to healthcare. Instead of providing a defined benefit – like a hospital plan that pays 90% of the patient’s expenses. You are saying “Here is a fixed dollar amount. Spend it for your own medical needs and apply the money where you see fit.” The HRA is a defined contribution approach to healthcare. Instead of providing a defined benefit – like a hospital plan that pays 90% of the patient’s expenses. You are saying “Here is a fixed dollar amount. Spend it for your own medical needs and apply the money where you see fit.”

23. (c) 2002 MHM Business Services, Inc. How to Use an HRA Defined Contribution Approach Cap benefit costs per employee Lower benefit costs per employee Enhance Participation in FSA Retirement Benefits Now let’s look at some additional examples of how HRAs can cap or lower your benefit costs, enhance participation in your FSA, and be utilized for retirement benefits. Now let’s look at some additional examples of how HRAs can cap or lower your benefit costs, enhance participation in your FSA, and be utilized for retirement benefits.

24. (c) 2002 MHM Business Services, Inc. Cap Benefit Costs with an Insurance Only Plan HRA to cover insurance premium costs formerly paid by employer Future insurance premium increases paid by employee Can not allow 125 salary redirection and option to pay premiums from HRA at the same time Designate the HRA to be used first for premiums Cap benefit costs with and Insurance Only HRA. This is just like our example of the small employer that we started out with. The employer delivers a set amount of dollars to each employee to be used only for insurance premiums. Future premium increases will be paid by the employees. Your HRA plan will be designed so the premiums must be paid from the HRA first, to conform to IRS guidance.Cap benefit costs with and Insurance Only HRA. This is just like our example of the small employer that we started out with. The employer delivers a set amount of dollars to each employee to be used only for insurance premiums. Future premium increases will be paid by the employees. Your HRA plan will be designed so the premiums must be paid from the HRA first, to conform to IRS guidance.

25. (c) 2002 MHM Business Services, Inc. Lower Benefit Costs with a Bridge Plan Combine HRA with a high-deductible insurance product Provide higher-deductible/out-of-pocket insurance product Provide employee “bridge” with HRA Want to try to lower those high insurance premiums? Provide a higher-deductible insurance product with a lower premium. Then use an HRA Bridge Plan to cushion or bridge the out-of-pocket expenses that employees must pay for deductible expenses. Results? Lower premium costs. And the unused dollars from the HRA may be retained by employer or rolled forward at year end. Want to try to lower those high insurance premiums? Provide a higher-deductible insurance product with a lower premium. Then use an HRA Bridge Plan to cushion or bridge the out-of-pocket expenses that employees must pay for deductible expenses. Results? Lower premium costs. And the unused dollars from the HRA may be retained by employer or rolled forward at year end.

26. (c) 2002 MHM Business Services, Inc. Lower Benefit Costs Per Employee with Limited Plan Delete prescription card contained in current benefit package Install an HRA Results Lower premium costs Employees make wiser choices for fewer/generic drugs You may wish to no longer offer a previously available benefit. Let’s look at your current prescription card. Dropping or curtailing this coverage may allow you to offer an HRA to each employee. The Limited Plan HRA would be designed to cover only prescription drugs. Now the employee has to make wiser choices. They may move to an over-the-counter medication or look for less expensive generic drugs. Either way – you’re ahead by controlling benefit dollars. You may wish to no longer offer a previously available benefit. Let’s look at your current prescription card. Dropping or curtailing this coverage may allow you to offer an HRA to each employee. The Limited Plan HRA would be designed to cover only prescription drugs. Now the employee has to make wiser choices. They may move to an over-the-counter medication or look for less expensive generic drugs. Either way – you’re ahead by controlling benefit dollars.

27. (c) 2002 MHM Business Services, Inc. Roll Forward Approach Smaller funding per year – like ¼ of deductible amount Retiree funding Designate percentage of annual limit that may be rolled forward Designate that FSA must be used first – more money rolled forward, fewer HRA reimbursements The unused funds in each employee’s account may roll forward from year to year. That means more flexibility for you and your employees. Looking back at the Bridge HRA Plan, the dollar amount provided by the employer need not be 100% of the difference in deductible. By providing only a third or a forth of the deductible allows for fewer benefit dollars spent in each year, but lets the employees roll their HRA forward from one year to the next and eventually have the full deductible amount in their account. Allow employees to save their HRA funds for retiree health coverage. Your plan may be designed to roll forward only a portion of the total account balance or designate that your Cafeteria Plan FSA pay healthcare expenses before the HRA. Fewer HRA reimbursements with more funds being rolled into future years.The unused funds in each employee’s account may roll forward from year to year. That means more flexibility for you and your employees. Looking back at the Bridge HRA Plan, the dollar amount provided by the employer need not be 100% of the difference in deductible. By providing only a third or a forth of the deductible allows for fewer benefit dollars spent in each year, but lets the employees roll their HRA forward from one year to the next and eventually have the full deductible amount in their account. Allow employees to save their HRA funds for retiree health coverage. Your plan may be designed to roll forward only a portion of the total account balance or designate that your Cafeteria Plan FSA pay healthcare expenses before the HRA. Fewer HRA reimbursements with more funds being rolled into future years.

28. (c) 2002 MHM Business Services, Inc. Forfeiture Approach Unused dollars are forfeited back to the employer Cap or lower benefits cost Roll forward during period of employment, forfeited upon termination of employment May cause discretionary use of fund Designate that FSA be used last Although IRS guidance allows the unused funds in an HRA to roll forward each year. You, the employer can design your HRA plan to forfeit any unused dollars at the end of the program year. This approach can cap or lower benefit costs. However, be aware – if the employee knows that the HRA funds will go away at the end of the year, they may be more apt to make discretionary medical expenditures rather than forfeit the money. Your HRA plan can designate that employees’ FSA deposits be used last. All or most of the HRA account will be depleted and have less chance for building into large HRA balance.Although IRS guidance allows the unused funds in an HRA to roll forward each year. You, the employer can design your HRA plan to forfeit any unused dollars at the end of the program year. This approach can cap or lower benefit costs. However, be aware – if the employee knows that the HRA funds will go away at the end of the year, they may be more apt to make discretionary medical expenditures rather than forfeit the money. Your HRA plan can designate that employees’ FSA deposits be used last. All or most of the HRA account will be depleted and have less chance for building into large HRA balance.

29. (c) 2002 MHM Business Services, Inc. Enhance Participation in FSA HRA as “seed” money to begin participation in a reimbursement plan With employer participation, employees willing to more salary redirection $ “Guarantee” no loss in Health FSA How can an HRA increase participation in your Section125 Health FSA? First, the HRA works as “seed” money so that employees can get reimbursed for eligible medical expenses by just following a few, simple rules. As additional medical expenses rack up, the employee sees the benefit of setting aside a portion of their own paycheck for these expenses. Seeing that the employer is willing to make dollars available for medical expenses make employees more willing to participate in an FSA. And – with an HRA, the employee is practically guaranteed of receiving their full annual FSA election. FSA deposits are assigned for known medical expenses, with the HRA as a cushion for unexpected healthcare costs. How can an HRA increase participation in your Section125 Health FSA? First, the HRA works as “seed” money so that employees can get reimbursed for eligible medical expenses by just following a few, simple rules. As additional medical expenses rack up, the employee sees the benefit of setting aside a portion of their own paycheck for these expenses. Seeing that the employer is willing to make dollars available for medical expenses make employees more willing to participate in an FSA. And – with an HRA, the employee is practically guaranteed of receiving their full annual FSA election. FSA deposits are assigned for known medical expenses, with the HRA as a cushion for unexpected healthcare costs.

30. (c) 2002 MHM Business Services, Inc. Competing for Employees Recruiting Cutting-edge benefit Employee choice Retention Employee choice Roll forward account Retiree benefits Health Reimbursement Arrangements are cutting edge in the benefit arena. One of the greatest advantages is that HRAs can be implemented by small or large employers. More employee choice equals greater employee satisfaction and better retention.Health Reimbursement Arrangements are cutting edge in the benefit arena. One of the greatest advantages is that HRAs can be implemented by small or large employers. More employee choice equals greater employee satisfaction and better retention.

31. (c) 2002 MHM Business Services, Inc. Retiree Benefits Employee decision to save for retirement health benefits Retirement benefit account has accrued total available over several years Pay for long-term care insurance premiums Maximize benefits to owners and key employees Have a retiree benefit package that you can no longer afford? How would you like to provide retirement benefits, but don’t know where to start? You can start with an HRA. Employees determine how much money they want to have available for retirement benefits. No additional cash outlay by your company to retired personnel. Don’t forget – long-term care premiums can be paid from an HRA. And by covering retired employees, you can continue to maximize benefits to owners and key employees. The HRA account balance can never be “cashed out” or otherwise paid as a cash bonus to employees or former employees. The funds must always be used for eligible medical expenses.Have a retiree benefit package that you can no longer afford? How would you like to provide retirement benefits, but don’t know where to start? You can start with an HRA. Employees determine how much money they want to have available for retirement benefits. No additional cash outlay by your company to retired personnel. Don’t forget – long-term care premiums can be paid from an HRA. And by covering retired employees, you can continue to maximize benefits to owners and key employees. The HRA account balance can never be “cashed out” or otherwise paid as a cash bonus to employees or former employees. The funds must always be used for eligible medical expenses.

32. (c) 2002 MHM Business Services, Inc. Offer More Choices Voluntary Products Employee pays all Premiums paid from FSA or HRA More choices. That’s what benefit design programs are all about. Please feel free to ask me any additional questions you might have about your benefit plans.More choices. That’s what benefit design programs are all about. Please feel free to ask me any additional questions you might have about your benefit plans.

33. Maximizing Benefits with HRAs