Health Reimbursement Arrangements (HRAs) are employer-funded benefit plans that assist employees in covering qualified medical expenses. Below we will explore the concept of employee classes within HRAs and how employee classes allow you more flexibility in your distribution of benefits, benefit eligibility, and reimbursement levels.
Depending on the HRA type, the employee class options differ. For example, the ICHRA offers more employee classes than the Standard HRA, whereas a QSEHRA doesn’t permit any employee classes. Liferaft’s HRA experts will recommend the best HRA type for your business and recommend employee classes that best suit the company's needs.
Employee classes refer to distinct groups or categories of employees within an organization. Each class may have unique characteristics, such as employment status, hours worked, or specific contractual arrangements. Recognizing and categorizing employees into different classes is essential in HRA administration, as it enables employers to tailor their HRA plans to meet the diverse needs of their workforce.
Full-Time Employees: These typically work a standard number of hours per week, often with a fixed schedule, and are eligible for various employment benefits.
Part-Time Employees: Part-time employees work fewer hours than full-time employees and may have different benefit eligibility criteria.
Seasonal Employees: These employees are hired to work during specific seasons or periods of increased demand, such as holidays or summer months. Their employment duration is limited.
Temporary Employees: Temporary employees are engaged for a specific project or a predetermined period, and their employment is not intended to be permanent.
Contractors/Freelancers: Contractors and freelancers are not considered regular employees but may be engaged on a contractual basis to provide specialized services.
Union Employees: Union employees are part of a labor union and often have negotiated benefits and coverage under collective bargaining agreements.
Salaried Employees: Salaried employees receive a fixed salary regardless of the hours worked. They may have different benefit structures compared to hourly employees.
Hourly Employees: Hourly employees are paid based on the number of hours worked and may have different benefit eligibility criteria.
ICHRA employee classes are categories that employers can establish based on job-related criteria. These classes allow employers to differentiate contribution amounts based on full-time versus part-time status, geographic location, job position, and tenure. An employer could create classes for full-time employees, part-time employees, and seasonal workers, each with different ICHRA contribution levels. Employee classes help employers tailor their offerings to meet the needs and characteristics of other groups of employees within their organization.
Compared to the other HRA types, the ICHRA offers 11 different employee classes. The classes include the common types mentioned above and employees in a waiting period, combination classes, and rating area classes, as a few examples.
Employee classes play a vital role in shaping the design, eligibility, and benefits of HRAs. Here's how different employee classes can impact HRAs:
Depending on the employee class, eligibility requirements for participation in an HRA may vary. For example, full-time employees might have immediate HRA eligibility. In contrast, part-time employees may need to fulfill specific criteria, such as a waiting period or a minimum number of hours worked.
Employers can allocate different HRA contribution levels based on employee classes. For instance, full-time employees might receive higher contributions than part-time or seasonal employees.
The plan rules of an HRA can differ based on employee classes. Depending on the employee class, certain expenses may be covered or excluded, aligning with their unique healthcare needs.
When a business offers both an HRA and traditional group health insurance, it must ensure that employee classes meet minimum size requirements. Minimum size requirements help ensure the organization provides its HRA relatively and consistently.
These rules apply to businesses offering an Integrated HRA/Standard HRA/Group HRA, as well as companies who offer traditional group health to some employees and an ICHRA to others.
As for the QSEHRA, there are no minimum class size rules in place because the QSEHRA does not allow employers to customize benefits based on employee class. The exact reimbursement amounts can differ depending on the age of the employee and the employee's family status. The employee's family status can be employee only, employee and dependent(s), or family. The 2024 reimbursement maximum limit for individuals to receive is $6,150/year and $12,450/year for families.
Employers consider various factors when classifying employees, such as their job status, work hours, employment contracts, and applicable legal requirements.
Employee classes must comply with legal and regulatory requirements. Employers should strive for fairness and equal treatment among employee classes, avoiding any potential discrimination or violations of employment laws. Staying updated on legal guidelines and consulting with legal professionals is essential to navigating the complex landscape of employee classifications and HRAs.
To maximize the effectiveness of HRAs, employers can customize HRA plans to suit the specific needs of different employee classes. By offering other benefit structures, coverage options, and contribution levels, employers can provide targeted support to diverse groups within their workforce. Tailoring HRAs to employee classes demonstrates a commitment to employee well-being and helps attract and retain top talent.
Employers can leverage different employee classes within their organization to optimize HRA offerings in several ways:
Liferaft is an affordable HRA administrator that streamlines setting up and managing HRAs for businesses of all sizes. With Liferaft, employers can efficiently navigate the complexities of different employee classes and customize HRA plans accordingly. Liferaft provides user-friendly platforms, expert support, and comprehensive resources to ensure a seamless HRA experience for employers and employees.
An employee can belong to multiple employee classes within an organization. In some cases, employees may meet the criteria for more than one employee class based on different characteristics and classifications. For example, an employee could be a full-time employee and a member of a specific job category or work in multiple geographic locations.
Employers must comply with anti-discrimination laws, such as IRC Section 105(h) and the ADEA when establishing employee classifications for HRAs. These laws prohibit discrimination based on protected characteristics. Additionally, HRAs must align with ERISA regulations, ACA affordability standards, and any state-specific requirements. Employers should consult benefits consultants or advisors to navigate these legal requirements and ensure compliance with HRA employee classifications.
The contribution levels for different employee classes in a Health Reimbursement Arrangement can change over time. Employers can adjust the contribution amounts based on various factors, such as the organization's financial situation, changes in healthcare costs, or evolving workforce needs. As circumstances change, employers may review and modify the contribution levels for different employee classes to ensure the HRA remains effective and aligned with the organization's goals and resources. However, any changes should be made to comply with applicable laws and regulations, and employers should promptly communicate such changes to employees.
Liferaft’s HRA experts offer guidance to simplify HRA administration. This includes designing a custom HRA plan tailored to the company's needs and defining employee classes.
Yes, HRAs is an umbrella term for the many different types of health reimbursement arrangements available to employers. Other employer-funded health expense accounts include Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). These accounts do not reimburse employees for specific expenses but instead provide funds that employees can use on eligible health expenses.
Our team knows the ins and outs of the health insurance marketplace and will guide you towards the solution that make the most sense for your business and your team. Come with questions! Our experts are happy to dig into the details to get you the clarity you need.
During the call, Liferaft will run a cost-benefit analysis on your company's current healthcare spending and show you different ways you can save—without sacrificing plan quality. After your consult, Liferaft will design a unique plan for your employee's health insurance, including suggested plans and accounts, plan policy documents, and the annual budget.
