HEALTH REIMBURSEMENT ARRANGEMENTS

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1 Health Reimbursement Arrangements HEALTH REIMBURSEMENT ARRANGEMENTS Creative employee benefit plans that lower employer costs. P&A Headquarters, built in 1929

2 DEFINING HRAs WHAT ARE HEALTH REIMBURSEMENT ARRANGEMENTS? (HRAs) An HRA is an employer-funded benefit that is used to reimburse employees for medical care expenses as defined in IRS Code 213 (d). Employers contribute tax-deductible dollars to the account and employees receive reimbursements tax-free. The out-of-pocket medical expenses that may be reimbursed are the same as those that a health FSA* may reimburse. This includes insurance co-pays and deductibles, vision and dental expenses, overthe-counter medications, and prescriptions drug co-pays that are not covered by insurance. HRAs are flexible in design and can be restricted to cover only specific expenses, or can be included to cover all expenses as defined by the IRS. BENEFITS OF AN HRA EMPLOYER BENEFITS Employer contributions to HRAs are not subject to payroll taxes, workers compensation or pension and profit sharing contribution By combining a higher deductible insurance plan with an HRA, you can lower your company s health insurance costs! Administrative costs are tax deductible and can be paid by the employer, the employee or a combination of both HRAs complement FSA plans and help to increase FSA participation EMPLOYEE BENEFITS HRAs allow employees to allocate employer contributions to areas most beneficial to their individual needs Disbursements from HRAs are not subject to Federal, State, or Social Security taxes Depending on the plan design, HRAs can be carried over to retirement HRAs help offset employee out-of-pocket medical expenses COMBINING HRAs & FSAs: ENHANCING YOUR BENEFIT PACKAGE Although HRA and FSA plans are designed to reimburse employees for eligible medical expenses, each offers its own unique features, benefits and limitations to both the employer and employees. Many employer groups successfully incorporate both plans in their benefit offerings. Having both plans gives employees the opportunity to better manage their health expenses. The HRA gives the employee funds and the FSA allows the employee to add tax-free dollars to pay for additional out-of-pocket expenses. EXAMPLE An employee estimates that her out-of-pocket annual medical expenses will be $1,500 for the upcoming year. The employer-funded HRA will pay the first $500 of eligible expenses, but the employee is responsible for paying the remaining $1,000 of expenses. The employee can establish a Health FSA to pay for the remaining $1,000 of anticipated expenses. P&A provides an administrative system that seamlessly integrates these two programs. WHAT IS A HEALTH FLEXIBLE SPENDING ACCOUNT*? A Health Flexible Spending Account (FSA) is an employer-sponsored program, that allows participants to set aside pre-tax dollars from their paycheck to pay for medical, dental and vision expenses that are either partially covered by their insurance or not covered at all. By putting $1,000 of pre-tax money into an FSA, the employee will save about $300 for the year!

3 Health Reimbursement Arrangements HRA GUIDELINES WHO CAN SPONSOR HRAs? Corporations S Corporations Professional Service Corporations Partnerships Governmental Employers LLCs (Limited Liability Companies) LLPs (Limited Liability Partnerships) Sole Proprietors Non-Profit Organizations Churches and Church-Affiliated Organizations All of these types of companies can save payroll related taxes by instituting an HRA plan. Although certain regulations prohibit sole proprietors, partners, members of LLCs (most cases) and more than 2% owners of an S Corporation from participating in the plan, owners can still enjoy the payroll tax savings that result from sponsoring the plan. ( Employee shareholders of regular corporations are eligible to participate). Former employees and retirees can also be covered and continue to have access to unused funds in their accounts. WHAT ELSE DO I NEED TO KNOW? HRAs can be restricted to cover specific benefits (Example: prescription drug co-pays, physician office visits, inpatient hospitalization deductibles). HRAs cannot be cashed out upon an employee s termination of employment or retirement. Eligible expenses must be incurred during the employee s coverage period but can be reimbursed at a later date, depending on how the plan is designed. Plan design options are flexible to accommodate individual employer needs. Discrimination in favor of highly compensated employees is not allowed. The employer is required to pay eligible expenses only to the extent of the individual s account balance. The plan must be in writing and each plan participant must receive a copy of the Summary Plan Description. Plans with over 100 participants must file an annual Form These plans are subject to COBRA continuation rules (unless the sponsor is a church or church affiliate). 1

4 FREEDOM TO CREATE THE RIGHT PLAN FOR YOU AND YOUR EMPLOYEES With an HRA, you can offer your employees significant savings by helping reduce their healthcare related costs. And, because of the variety of unique plan designs you can choose from, you re given the flexibility to tailor a plan to best fit your company and your employees needs. P&A s HRA Administration ensures that your plan will be well serviced and always in compliance. Our in-house ERISA attorney works with you to create the plan that s right for you and guarantees that all rules and regulations are followed. A dedicated customer service team is ready to answer any questions your employees may have, taking the burden away from your HR department and giving you more time to focus on other responsibilities. We re here to help, to give you the customer service support that s necessary in providing a successful benefit program, and to create a positive experience for your employees. 2 Administered Around You

5 Health Reimbursement Arrangements HRA PLAN DESIGN OPTIONS Choose from a variety of HRA plan designs to complement your benefit package. From full, unrestricted plan options to restricted designs that permit only certain expenses, P&A is here to guide you and help you come up with a solution that makes the most sense for you and your employees. 1 coverage. GAP PLAN The gap plan design complements high deductible insurance products in that it only pays for deductible items eligible under the insurance plan, thereby filling the gap between the employee s out-of-pocket expenses and the insurance 2 UNRESTRICTED Pays medical expenses not paid by insurance, including but not limited to: insurance co-pays and deductibles, vision and dental expenses, prescription drug co-payments and non-traditional health care expenses, such as acupuncture. 3 RESTRICTED Under this design option, coverage is limited or restricted to specific expenses, such as vision, dental or prescription drug co-payments. 4 REFILL Benefit maximum remains constant and is replenished on an annual basis. 5 reimbursed ROLLOVER Unused account balances/unreimbursed expenses rollover and can be spent/ in future years or as benefit dollars become available. 3

6 P&A GROUP ADMINISTRATION SERVICES Our services provide you with everything that s needed to deliver a successful benefit plan to you and your employees. P&A Group s dedicated team of consultants, administrators, and customer service professionals ensure that you will receive the highest quality care, commitment and expertise. PLAN CONSULTING Experienced benefit consultants listen to your needs and determine the most efficient option(s) for you and your employees. PLAN IMPLEMENTATION Our marketing and administrative departments work together to process all necessary documentation to ensure smooth and successful plan setup. LEGAL COMPLIANCE Our in-house ERISA attorney ensures that all plans are in compliance with the IRS and Department of Labor rules and regulations. PLAN ADMINISTRATION Your dedicated account administrator, along with our customer service team, are available to service your company s plan, monitor account balances and adjudicate claim reimbursements. Extended customer service hours are M-F, 8:30 AM - 10:00 PM ET. ADVANCED TECHNOLOGY FOR EMPLOYERS & PLAN PARTICIPANTS HR Connect - employer web portal where you can create custom reports, add employees online, change demographic information, upload a file and more Custom reporting available including monthly participant balances, benefits card usage, claims paid to date, deposits paid to date, summary of daily reimbursements and more Mobile website - visit on your mobile device Text message features for participant account information including account balance, deposit history and claim reimbursement Upload claims and supporting documentation through electronic claim submission Online web chat available during customer service hours 4

7 Health Reimbursement Arrangements HRA BENEFITS CARD WHAT IS AN HRA BENEFITS CARD? The HRA Benefits Card can be offered with many HRA plan designs, like certain Gap Plans and Unrestricted HRAs. Offering the Benefits Card with your plan is encouraged because it enhances the plan and gives your employees quicker access to their account. The HRA Benefits Card, issued under the MasterCard system, allows employees to eliminate the hassle of paying for expenses with out-of-pocket money. Eligible items and services can be paid for immediately with an HRA Benefits Card by swiping the card like any other debit card. The Benefits Card recognizes Merchant Category Codes (MCCs) and the Inventory Information Approval System (IIAS) so only IRS eligible expenses are charged at pre-approved stores and service providers. When the card is swiped the amount is automatically deducted from the participant s account balance. Participants who do not use the HRA Benefits Card can still receive reimbursement for eligible expenses by submitting a claim form and a copy of proof of service. Reimbursement is received either via direct deposit or manual check. ENHANCE YOUR EMPLOYEES HRA WITH THE P&A BENEFITS CARD Reduce the time spent submitting claims and waiting for reimbursements Additional cards for spouses and dependents or replacement cards are free of charge Help substantially reduce paperwork when using the Benefits Card Real-time account balance is available 24/7 by calling the number on the back of the card ASK US ABOUT THE HRA BENEFITS CARD! The simplicity of the Benefits Card Providing employees immediate access to their HRA Plan without the hassle of submitting claim forms and waiting for reimbursement! 5

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