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Q. What is the legal basis for the program?
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This program is authorized under Section 105 of the Internal Revenue Code. The high deductible Core Plan is a partial self-funded ERISA program. To date, the IRS has issued many private letter rulings supporting 105 plans that currently exist. |
Q. What size groups can participate in this program?
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There is no minimum or maximum size limit and this program may be used as a partial carve-out or a full replacement for your current health plan. |
Are there any required plan designs?
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No. Plan designs will vary dependent upon the unique requirements of each employer and their employees. However, section 105 does specifically state that the plan must be non-discriminatory and that funds may only be used for qualified medical expenses as outlined by the IRS, or any subset of qualified medical expenses as defined by the Plan. |
How is the HRA Plan funded?
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The HRA Plan is funded by the employer on a schedule established by the employer. The employer pays only the incurred claims and does not pre-fund the HRA account balance. |
Are HRA plan funds subject to COBRA?
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COBRA applies to any arrangement through which an employer provides health care coverage to employees or retirees. COBRA applies to HRA plans. |
What happens if an employee terminates employment before the end of the plan year?
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Should an employee terminate prior to the end of the plan year, and not take COBRA, only eligible expenses incurred while covered under the plan will be eligible for reimbursement. |
How are claims processed?
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Each employee receives a personal identification card that reflects the coverage under the Core Plan, as well as the coverage under the HRA plan account. Providers or the employee will send the claims to the administrator and if eligible the claims will first be applied against the high deductible Core Plan. Automatically, the claims will also be processed under the HRA plan and checks will be issued to the provider on assignment, or the employee if the bill has been paid. |
What happens at the end of the year and all HRA account funds have not been spent?
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Any unspent funds will automatically be rolled over into the employee’sHRA account for the following year, to be added to any amount that the employer has deposited for the following year. The amount of the rollover may vary based upon individual plan design and any other potential use of the funds will be determined, once the final regulations are published. |
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