Health Reimbursement Accounts

[Guest mrilao]

We are thinking about restructuring our benefit arrangements to include a health reimbursement account - HRAs (all employer money per 2002-45 and 2002-41 - rather than FSAs).

I've been reviewing the recent IRS guidance regarding HRAs and was wondering what the general thought is on having a funded aspect to the arrangement.

For instance, the guidance mainly centers on amounts held in the employer's general assets - but I have a few providers/administrators trying to sell me on a "funded" product - where amounts are put in each year and follow the VEBA concept.

Has anyone looked into this issue or have any thoughts or concerns? Thanks!

[GBurns]

My first thought is Why do you need an HRA? The fact that you want to have employer only funding does not mean that you need an HRA, you can still have an employer only funded FSA. It is very very common.

Second thought was why would you want to have the complexity, expense, compliance problems, account and deductibility limitations that you would have with a VEBA.

By the way, What in heaven do you mean by "follow the VEBA concept"? Do not let anyone confuse you with ....

Third, Would it not be much more expensive and beyond the employer's control to use a VEBA or anything that has to be fully funded in advance rather than on an "as you go" basis?

In general the only reason for an HRA is to have unused funds rollover. If you are not creating a surplus then there is nothing that is there to be rolled over and therefore an FSA or a straight section 105 MERP should serve you better and be more cost effective.

[Guest mrilao]

The main reason for the change is to save money (offering a high deductible plan in addition to the HRA) well still getting good PR on benefits with the employees.

The other attractive features involve carry over amounts, increasing the “total compensation” analysis, shift the burden of making health insurance choices from the employer to employee and to make employees more aware of health insurance and other health care costs.

Are you aware of any guidance on the VEBA part of it?

[Guest Rae Posey]

I will be happy to answer any questions you have on HRA's.

You may or may not need HRA's, according to your demographics and claims history.

Also, there is really no need to have a VEBA and fund the accounts up front. Our in house legal counsel would be happy to discuss this in detail with you in relation to your company in particular. We haven't ever had anyone actually request that the accounts be funded through a VEBA, although it is an option. Our clients typically opt to list the accounts as an unfunded liability.

For more information, please see our press release on benefitslink dated today, Jan 22. My company specializes in HRA's and we offer the easiest plan to implement in the market today. Also, it is very inexpensive to administer and return on investment can be quite substantial. You may contact us at 1-877-467-2758 or direct at 205-397-8310. Or visit us on the web at www.msaplus.com.