Comparing different types of hra'S
Health reimbursement arrangements (HRAs) are employer-funded accounts that reimburse employees for their eligible out-of-pocket medical expenses on a tax-favored basis. Although HRAs provide significant tax benefits, they are subject to strict plan design rules. However, a final rule expands the use of HRAs, effective for plan years beginning on or after Jan. 1, 2020. Beginning in 2020, the different types of available HRA plan designs are:
- - HRAs integrated with group health plans (GHP-HRAs);
- - Individual coverage HRAs (ICHRAs) – effective for 2020;
- - Excepted benefit HRAs (EBHRAs) – effective for 2020;
- - Qualified small employer HRAs (QSEHRAs)
- - HRAs that only pay excepted benefits; and
- - Retiree-only HRAs.
The following chart compares key features of the different types of HRAs.
Types of HRAs
- - GHP-HRA – This HRA must be integrated with the employer’s group health plan and meet - certain other requirements.
- - ICHRA – Employers of all sizes may use this new type of HRA to reimburse individual health insurance premiums (subject to certain requirements).
- - EBHRA – This new type of HRA can offer a limited benefit of $1,800 per year (as adjusted).
- - QSEHRA – This type of HRA can be used by small employers to reimburse individual health insurance premiums.
- - HRA that only pays excepted benefits – This type of HRA only pays for excepted benefits, such as limited-scope dental and vision coverage.
- - Retiree-only HRA – This type of HRA can only provide benefits to former employees
*As a general rule, employers must offer the ICHRA on the same terms to all employees in a class. Permissible employee classes include: full-time employees, part-time employees, salaried employees, non-salaried employees, seasonal employees, collectively bargained employees, employees in a waiting period, temporary employees, employees whose primary employment site is in the same rating area; nonresident aliens without U.S.-based income; and any group of employees formed by combining two or more of these classes. Minimum class size requirements may apply, depending on the classes used.