Define
What is a Standard HRA?
Explore the concept of a Standard HRA (Health Reimbursement Arrangement) and how it can benefit both employers and employees.
July 10, 2023
Standard HRAs, also known as Integrated HRAs, are a tax-free health reimbursement arrangement that employers use to provide employees with funds for qualified out-of-pocket medical expenses. These accounts are employer-owned and employer-funded, allowing employers to choose the contribution amounts, eligible expenses, and reimbursement methods.
A Standard HRA is an employer-sponsored arrangement that enables the reimbursement of eligible medical expenses incurred by employees. It is distinct from traditional health coverage provided by employers. The main use cases for offering a Standard HRA are to supplement your group health insurance plan and increase employee satisfaction and health outcomes. It is also a tax-incentivized way to increase overall compensation through expanded tax-free health benefits.
Standard HRAs are employer-sponsored arrangements that enable the reimbursement of eligible medical expenses incurred by employees. These arrangements differ from traditional health coverage provided by employers. Instead, Standard HRAs serve as a supplemental benefit that employers offer to enhance their employees' healthcare support.
To implement a Standard HRA, employers must also provide a group health insurance plan that meets the Affordable Care Act's definition of minimum essential coverage. By integrating the HRA with the group plan, employees can receive additional financial support for out-of-pocket medical expenses that aren't fully covered by their insurance.
Employers play a crucial role in designing a Standard HRA that aligns with their budget and company values. They have the flexibility to determine the contribution amounts, eligible expenses for reimbursement, access methods to HRA funds, and the handling of any unused funds at the end of the year. Additionally, employers can choose whether employees retain access to their HRA after retirement, providing continued support for post-employment healthcare expenses.
The integration of a Standard HRA with a group health plan is required to offer the plan and comes with significant benefits. It allows employers to supplement their group coverage by reimbursing employees for copays, coinsurance, and medical care expenses incurred before meeting the insurance deductible. This additional financial support enhances the attractiveness of the employer's health benefit, enabling them to recruit and retain top talent.
One of the advantages of Standard HRAs is the absence of maximum or minimum contribution limits for employers. Unlike an Excepted Benefit HRA which also pairs with an employer insurance plan, the Standard HRA is not subject to annual rate limits.
Employers can determine the amount they wish to contribute to the accounts based on their budget and desired level of support for employees. It's important to note that employees cannot contribute funds to the Standard HRA accounts, as they are fully funded by the employer. Furthermore, these HRA funds do not count as part of an employee's gross income, providing a valuable tax advantage.
The Standard HRA—like all health reimbursement arrangements—does not have any minimum employee participation requirements, meaning that you can offer the benefit regardless of how many on your team plan to take advantage of it.
Implementing a Standard HRA in the benefits package can bring significant advantages for both employees and employers. It helps reduce health insurance costs, provides flexibility in plan options, offers tax benefits, promotes employee health and productivity, and contributes to increased employee retention and effective recruitment efforts. By incorporating a Standard HRA into their benefits package, employers can create a supportive and appealing work environment while employees gain access to financial assistance for their healthcare needs.
Unlike other types of health accounts, such as Health Savings Accounts (HSAs) that require enrollment in a High Deductible Health Plan (HDHP), a Standard HRA can be paired with any kind of group health insurance plan. This flexibility allows employers to offer a range of plans that suit their budgets and accommodates the diverse needs of their employees. Employees can choose the health plan that works best for their families, knowing that their participation in the HRA won't be affected.
Employer reimbursements through a Standard HRA are considered tax-deductible business expenses. This tax advantage provides additional savings for employers and encourages them to offer comprehensive healthcare benefits to their employees.
With a Standard HRA in place, employees have a means to pay for their medical expenses, which promotes proactive healthcare behavior. Employees are more likely to seek medical attention promptly when health issues arise, rather than waiting for emergencies to occur. Regular medical care leads to better overall health, resulting in more productive employees who can perform at their best.
By including a Standard HRA in the benefits package, employers can experience reduced health insurance costs. When employees utilize their HRA funds for eligible medical expenses, fewer claims are filed with the insurance carrier. This, in turn, helps maintain or lower insurance premium rates, providing cost savings for employers.
Employee turnover can be costly for businesses, with expenses ranging from 1.5 to 2 times an employee's annual salary. By offering a Standard HRA that helps employees cover out-of-pocket medical expenses, employers create a supportive work environment that fosters loyalty and increases employee retention. When employees feel supported and valued, they are more likely to stay with the company. Additionally, a comprehensive benefits package that includes a Standard HRA can be an effective recruiting tool. It showcases the employer's commitment to employee well-being and attracts top talent seeking comprehensive healthcare benefits.
No, employees cannot contribute funds to a Standard HRA. Standard HRAs are fully funded by the employer, and employees do not make any contributions to the account.
A Standard HRA allows for the reimbursement of qualified out-of-pocket medical expenses. These expenses can include copays, coinsurance, deductibles, and other eligible medical care costs. The specific expenses that can be reimbursed may vary based on the employer's plan design and the guidelines set forth by the IRS.
Liferaft offers a simplified and user-friendly platform for HRA administration. With Liferaft, employers can easily set up and manage their Standard HRAs, including customizing benefit design, handling employee documentation, and facilitating expense management. Liferaft provides expert guidance, automated reimbursement processes, and comprehensive reporting, making HRA administration straightforward and efficient for employers.
No, there are no maximum or minimum contribution limits imposed on employers in a Standard HRA. Employers have the flexibility to determine the contribution amounts based on their budget and the level of support they want to provide to their employees. This allows employers to tailor the Standard HRA to their specific needs and offer a benefit that aligns with their financial capabilities.
Integrating a Standard HRA with a group health plan offers several advantages. It provides greater plan flexibility, lowers health insurance costs, promotes employee wellness and productivity, enhances retention, and improves recruitment opportunities.
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.
