Example 1:
- Employer purchases a group health plan with a $2500 deductible
- Through an HRA plan, employer will “buy back”
the deductible to $500 for the employee
- Employee deductible is now $ 500.00
- Employer exposure is $ 2000.00 times the number of employees
taking coverage
- Employer average payout is about 27% of this exposure
- Depending on how the plan document is drafted, all or
portions of the “savings” can be rolled over
to fund benefits for the following year
Example 2:
- Employer offers an HRA/125 plan combination with a fixed
amount available for each employee
- Choice of health, dental, vision, long term care and other
plans are available, together with amounts that can be applied
to covered and not covered out of pocket medical expenses
- The “use it or lose it” rule is eliminated
- Funds can be rolled over to assist other benefit planning
in subsequent years
Under these examples, employers are budgeting the benefit
dollars to be available for use by the employees at any time
during the plan year.
HRAs will require a separate plan document and are subject
to non-discrimination testing under Section 105(h) of the
IRC. Depending on the plan provisions of the employer, the
plan balance can be transferred with the employee to a new
employer’s plan.
To see how much you will save use a Savings
Calculator.
For a Benefit Comparison Chart for Health FSAs, HRAs, and HSAs click here.
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