Health Reimbursement Arrangements

[Guest Lisa-Beth]

Do these fall under Section 125 ?

Do they require a plan document? Anyone know where I can find a generic plan document for a reasonable price that can be modified to my company's specifics? We don't need third party administration because the business is very small at this time.

Thanks. If I've posted this in the wrong area, please let me know. I couldn't any posts relating to this subject.

Lisa-Beth

[GBurns]

No, HRAs do not fall under section 125. However, in most cases they will be used in conjunction with or be related to the overall employee benefits program which most likely will have a section 125 component.

Maybe you should start first by learing about HRAs etc. Using the Benefitslink Search Engine you can find many articles like this 1 :

http://www.kilpatrickstockton.com/publicat...il.aspx?ID=1101

You should also read the Revenue Ruling and Notice from the IRS that explains thier position.

It is quite possible that you really do not want an HRA. What are you trying to accomplish or solve and Why do you think that an HRA can help????

Yes, a Plan Document is needed but I have not yet seen 1 that I can refer you to as yet, maybe others have. I do not thinl that it is advisable to self administer, but that really depends on other factors including your plan design. Your plan design will dictate the complexity of administration and depends on what you are trying to accomplish etc with an HRA.

[Guest Lisa-Beth]

Thank you for your response. This place seems to be a plethora of knowledge.

I have researched HRAs ad nauseum. I'm fairly certain it's a good option for our small company. I am familiar with section 125 plans and self-adminster one for another small company. I know that's not what we want.

Our company is very small at this time (2 employees). We do not offer a group health plan because we can't even get one in our state with fewer than 10 employees.

I understand an HRA is employer funded and both medical expenses and medical insurance premiums for individual health plans can be reimbursed by the HRA.

I understand it to be a very flexible product allowing the employer to set the contribution amounts, determine if funds will roll-over from year to year, and stipulate exactly how reimbursements will occur: like if the employee can use the funds in advance or must wait until his account has acumulated the full amount needed before reimbursement can be made...etc....

It sounds like it provideds the ultimate flexibility for what we need.

Under the section 125 I self-administer we offer premium deduction for group dental premiums for dependants and an FSA for medical costs. With only two employees participating in the pre-tax medical care spending account it's not too difficult to self administer so I think I could handle it with regards to the new company and the HRA.

If you feel I've reached my conclusions in error.......feel free to set me straight.

Lisa

[Guest Lisa-Beth]

One more thing..........

Thank you for the link. It confirms what I've learned and is very well presented. I'm still not 100% clear as to whether or not a plan document is truly required. I've heard different opinions on this. The article doesn't seem to be exactly clear on the requirement either. I'm tempted to just put it together the best I can and take my chances. I'd love to purchase a plan document but can't seem to find one without third party adminstration attached to it. Bummer for a small employer.

[Ron Snyder]

Didn't notice your post earlier. A plan document is required. If you don't have a document, take a flex document and make the necessary changes:

1. Specify that contributions are by the employer, and the basis for them.

2. Remove the use it or lose it language.

3. Add vesting or forfeiture provisions.

4. Replace 125 nondiscrimination rules with 105(h) nondiscrimination rules.

Or simply bite the bullett and pay a firm that provides such plans and documents for them to put the plan together.

[Guest Lisa-Beth]

Where would one find the non-discrimination rules for section 105? Would this be in the code itself? I do have a section 125 plan document that I could use as a framework. We only have two employees at this time and it's not feasible to pay a third party administrator. The prices I've been given for a plan document range from $500 to $1000. For that much I think I'd rather take my chances with the IRS. I know whatever we do will be very fair.

I did pay $150 for the section 125 plan document but the firm who prepared it for us isn't doing HRA plan documents yet. I know their costs will be reasonable if they do decide to offer one later on. So I do have this I can go by. Somehow I think this is likely much simpler to do than it seems.

Anyway, would I find the non-discrimation rules in the IRS code under section 105?

Thank you for responding.

[GBurns]

Scroll down the left side of this link to find both Internal Revenue Code section 105 and Treasury Regulations section 1.105 :

http://www.legalbitstream.com/

[Mary Kay Foss]

Practitioners Publishing Co had a sample document as part of their Practitioners Tax Action Bulletin service. It may be possible to contact them to get a copy.

[Guest JTrini8302]

If this helps at all, there are Health Care FSAs that are both employer and employee funded. We administered a plan where the employer "seeded" a certain amount to the plan, and if the employee chose, they could then contribute any amount about the employer amount to the annual maximum.

Visual:

Annual EE Contribution Max for HCRA: $5000

ER seeds $1000

(EE has $1000 to use regardless of their contribution)

EE has option to contribute up to $5000

Total annual plan contribution of up to $6000

Bizarre though it was, it worked. And since the limits on HCRAs are set by the employer not the IRS, you get a little more flexibility.

[Guest Cgross]

Not about HRAs, but noticed you said that in your state you couldn't get

a health plan with under 10 employees?

Under HIPAA small group market requirements, the definition of a small group is 2-50. If a carrier is in the small group market, they must Guarantee issue a plan to a small group. You may want to double check with your state DOI if you are being told you can't get a plan.