Guest scparlee Posted December 8, 2004 Share Posted December 8, 2004 I am looking around comparing HRA's (Health Reimbursement Arrangements). In the past I had looked at HSA's, but in this case there is difficulty in finding a qualified plan (State of Maine) and looking to minimize premiums / maximize benefits. I seem to be getting some conflicting information that I wondered if anyone here could clarify. 1)In a 1 person corporation can the HRA be established to cover premiums and a certain amount of out of pocket costs? 2)Does the amount covered have to be set at the beginning of the year or can it just cover all expenses? 3)I see that the account values can roll year to year and that employers may allow access after the employee leaves. Does that mean in an owner employee only arrangement that the account could be maintained for allowable health expense withdrawals until it was liquidated? 4) Does anyone know of any decent economical providers for a 1 person plan? or know of someone who offers a self admin setup? Thank you! Stephanie Link to comment Share on other sites More sharing options...
vebaguru Posted December 9, 2004 Share Posted December 9, 2004 1) In a 1 person corporation can the HRA be established to cover premiums and a certain amount of out of pocket costs? Yes. However, it is possible that it only works for a "C" corporation and not for an "S" corporation. 2) Does the amount covered have to be set at the beginning of the year or can it just cover all expenses? It depends upon whether or not it is a health reimbursement arrangement or a medical expense reimbursement arrangement. HRA-amount must be sent, but may carry over to subsequent years; MERP-total reimbursement may be provided, but does not carry over. Perhaps your client could adopt a combination of the two plans so that complete reimbursement is provided through the MERP, and HRA funds are strictly for the purpose of funding future (post-retirement?) medical costs. Of course such an arrangment would require an actuarial determination under IRC 419A©. 3) I see that the account values can roll year to year and that employers may allow access after the employee leaves. Does that mean in an owner employee only arrangement that the account could be maintained for allowable health expense withdrawals until it was liquidated? Yes. 4) Does anyone know of any decent economical providers for a 1 person plan? or know of someone who offers a self admin setup? I doubt that there is an economical way to establish such a plan unless your client is going to contribute $30,000 per year or more. We set them up but charge $2,500 plus $1,000 per year to administer. If you're still interested, contact me off board. Link to comment Share on other sites More sharing options...
Guest scparlee Posted December 9, 2004 Share Posted December 9, 2004 Thank you for the replies, very helpful. I am looking at more like 9,000-10,000 max set aside, so you are right 1,000 a year would be pretty steep. Am I reading it right that a MERP would handle the same expenses (premium plus all OOP), there would just be no rollover benefit? I am not downplaying the rollover benefit, at all. But if the option is 1,000 a year to get the rollover, it doesn't seem worth it here. And do I understand it correctly that the C Corp just needs to establish the plan in the minutes of the corp? No 5500's or anything? Thanks again! Stephanie Link to comment Share on other sites More sharing options...
vebaguru Posted December 14, 2004 Share Posted December 14, 2004 Am I reading it right that a MERP would handle the same expenses (premium plus all OOP), there would just be no rollover benefit?Yes you are.But if the option is 1,000 a year to get the rollover, it doesn't seem worth it here.Agreed.And do I understand it correctly that the C Corp just needs to establish the plan in the minutes of the corp? No 5500's or anything?Since it has no assets, I don't believe that a 5500 is required. However, I never said that no plan document was required. Our plan document is about 30 pages. Link to comment Share on other sites More sharing options...
Guest scparlee Posted December 23, 2004 Share Posted December 23, 2004 Thank you for the information. I don't know if you offer document services, but if so, how much would you charge to do a plan doc for a single employee MERP? Thanks again, Stephanie Link to comment Share on other sites More sharing options...
Guest donmartin Posted January 21, 2005 Share Posted January 21, 2005 Regarding HRAs IRS pub 969 says on page 13 "certain limitations may apply if you are a highly compensated employee". My question is: If a client owns a one person S corp where he is the sole owner and sole employee and converts it to a C corp, what is the W-2 income limit for the owner to have an Health Reimbursement Acct? For 401k the definition of HCE is 85,000 so would that also apply? Link to comment Share on other sites More sharing options...
vebaguru Posted January 23, 2005 Share Posted January 23, 2005 The "limitations" that may apply to HCEs are those imposed under Sections 105(h) and 505(b) of the Internal Revenue Code. It looks like I never answered Stephanie: we charge a minimum of $2,500 to draft an HRA document, not really worth it for your client. Link to comment Share on other sites More sharing options...
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