How to calculate premiums for HRA COBRA

[Guest Cgross]

Can't find the answer to this:

Plan has an HRA which gives employees $3000 at the beginning of the plan year for payment of expenses not covered under the medical plan. I know that the plan has to offer COBRA under the HRA to participants who terminate employment but have been unable to determine how to calculate the premiums to charge.

Since it is an HRA, the employer contributes the entire amount of $3000. As it costs the employer $3000 to fund this account, I assume the premiums would be $3000 plus the 2% admin fee allowed under the COBRA regs.

My problem is the timing of the premium payments. Since the employer makes the $3000 available to active employees at the first of the plan year, is it okay to make the terminated employee pay the entire amount up front, or does this violate the COBRA reg that states that the participant must be allowed to pay COBRA premiums monthly?

The plan allows participants to carry over unused monies, so it would benefit this employee to elect COBRA because they could essentially pay $3060 and have an additional $5000 in the account that had previously accumulated.

Thanks for any insight or comments.

[Don Levit]

Your question brought up a sales idea.

While not addressing your question specifically, I started thinking of using an HRA as a way to fund the gap between an HSA balance and the deductible.

Assume an employer believes that 7% of his employees will exceed the deductible on his catastrophic policy.

The HRA is set up to fund this difference. Reinsurance is bought for those years, in which the 7% is exceeded.

And, with longer-term employees , most or all of this gap could be filled.

Any discrimination issues here?

Don Levit

[GBurns]

You have me confused.

This is an HRA entirely funded by the employer, there are no employee contributions. The HRA is fully funded at the start of each year. During the year and after the HRA is fully funded, an employee terminates employment.

Are you saying that you want to charge the employee money as in having the employee make payments to this already fully funded HRA? Why?

And if the plan is already funded to the plan maximum where would the overfunding go and Why?

In essence why do you think that an employee can make any contribution to an HRA, whether while employed or under a COBRA election?