Health Reimbursement Account--Question abouttermination of participant balance

[mal]

We are in the process of developing an HRA for a union health plan. It is going to be offered to all participants eligible for coverage under the major medical portion of the plan.

This is a construction industry plan, which means that the number of eligible participants can significantly vary from month to month or season to season.

The question is whether there is any legal requirement to keep the account balance active for a certain period of time after the participant terminates coverage. As of now, the proposal is to provide for a forfeiture of the account at the end of first quarter following the plan year in which the termination occurred.

Any problems with this approach?

[Guest b2kates]

why would there be a forfeiture, it was my understanding that the participant owns their account balance. and that if properly structured it could be "rolled over" or maintained

[mal]

Account balances for active participants/retirees will be rolled over from year to year. I am talking about those who leave the trade and still have small balances in their HRA. We don't want to keep records year after year.

[Ron Snyder]

There is no specific problem with your approach. However, you might also wish to tie the forfeiture to hours of service, ie, the end of the first calendar in which the member completes zero hours of service. The HRA rules clearly do not require vesting, although most union plans have been created to provide for full vesting of accounts. However, terminated members should pay their own fees if they are permitted to continue the accounts.