Find answers to common questions and eligibility requirements below
Health Reimbursement Arrangements (HRAs) are defined contribution plans that employers own and control for the benefit of their employees. HRAs are 100% employer funded and represent an employer’s commitment to pay for certain healthcare expenses for their employees.
Employers choose HRAs because it gives them broad latitude to set the rules for contributions and reimbursements. They can decide what to reimburse, when to reimburse, how much to reimburse and in what order, who to cover, whether funds will rollover, and which health plan to pair with the HRA. With HRAs, one of the primary decisions is who pays first – the employer or the employee participant. Employers can also change the rules every year, if they want.
With few exceptions, almost all employees can participate in an HRA. Exceptions include partners in a business, members of LLCs, and shareholders who own more than 2% in S-corporations. Employers can cover employees only or employees and their dependents, as well as domestic partners as long as they meet the IRS Section 152 definitions. Employers can also choose to provide HRAs to retirees and former employees.
HRAs cannot discriminate in favor of highly compensated employees. Employers must pass two tests related to eligibility and benefits. Annual nondiscrimination testing is required with an HRA to insure that the employer meets participant eligibility requirements.
Highly compensated employees are defined as:
Yes. Sterling will provide nondiscrimination testing annually to make sure the employer is in compliance. If the employer requests, Sterling will also provide mid-year nondiscrimination testing.
IRS Code Section 152 has a two-prong definition of a dependent – qualifying child and qualifying relative. A qualifying child is any son, daughter, brother, sister, niece, nephew, or grandchild who:
A qualifying relative is any individual who:
The CARES Act states that consumers can purchase OTC drugs and medicines with funds from their health savings account (HSA), flexible spending accounts (FSA) or health reimbursement arrangement (HRA). Consumers may also receive reimbursement for OTC purchases through those accounts. In addition, menstrual products are now considered a qualified medical expense, meaning consumers can pay for or be reimbursed for these products through an HSA, FSA or HRA. This provision is effective for purchases made after December 31, 2019, and for reimbursements of expenses incurred after December 31, 2019. It does not have an expiration date. Please note, HRA provisions vary from employer to employer, so please check with your HR department and/or plan documents.