HRA Plan - How to Design a Health Reimbursement Arrangement in 3 Steps

First, the employer decides which employees qualify for the health plan.  An employer may decide to include (or not include) employees based on bona-fide job criteria such as job title, length of service with the company, geographic location, and hours worked per week. 

Second, the employer chooses a monthly contribution amount that the company can afford.  An employer may decide to vary the amount based on employee class based on bona-fide job criteria. Common employee classes include full-time versus part-time, job title, length of service, and geographic location. 

Example: Salt Lake Pizza company provides managers with a monthly allowance of $200/month and wait staff with a monthly allowance of $100/month.

Set Reimbursable Medical Expenses

Example: Salt Lake Pizza Company allows managers to be reimbursed for all type of IRS-qualified medical expenses with no restrictions.  The company allows wait staff employees to be reimbursed for health insurance premiums and dental expenses only.

As we discussed yesterday, the employer must purchase an HRA Plan Document that spells out the employee eligibility, contribution and eligible expense rules of the HRA Plan.