Need help with an HRA question...

[Guest Carolyn Barnard]

Our department is being spun-off and our department manager is forming his own new company...an LLC taxed as a sole proprietorship. We have elected to take COBRA benefits, and have gone through the list of options for favorable tax treatment (cafeteria plan, HSA and now HRA). As part of the comparison of these options, we are trying to determine if the spouse and dependents of a self-employed person may have their COBRA premiums reimbursed through an HRA (we understand that the self-employed person himself may not participate in the HRA). Has anyone come across this situation?

[Gary Lesser]

I am not sure about reimbursement through an HRA, but the expenses are qualified expenses under an HSA.

[Guest Carolyn Barnard]

Thank you for your response. We have had to eliminate the HSA option because our COBRA coverage is not a high deductible insurance.

[leevena]

I don't know if I fully understand your questions/situation. It sounds like you have 1 employee, a sole prop, and no other employees. This owner is not eligible for HRA or section 125 coverage (if there are other employees they would be eligible) and neither is the dependents they may have.

[Guest Carolyn Barnard]

There is the owner and his employed spouse, and seven other employees. Sounds like you're saying that we can't run the owner's spouse's or children's COBRA premiums through the HRA(?).

[leevena]

If the owners dependents are not employees of the company, and are on the benefit plans as just dependents, then you cannot run them through. The rules do not allow the sole prop to participate, and that includes any dependents they have on their plan. If the dependents employees, that is a different story.

[Guest bmagee]

Does the answer change if the Employer is an S-Corp and the Employee is the spouse of the 100% S-Corp owner. Can the Spouse participate in the HRA if there are no other employees?