A health reimbursement arrangement, or HRA, is an IRS-approved health benefit that allows for tax-free reimbursement of medical and insurance expenses. To be compliant, it must follow certain requirements—including having formal plan documents in place.
HRA plan documents describe the benefit's terms and conditions related to the operation and administration of the benefit. In this post, we'll cover the requirements you need to know in order to set up and offer an HRA.
Let's get started.
HRA plan documents and ERISA
The HRA is subject to general ERISA requirements, including the need to provide a legal plan document in writing. A Summary of Benefits is not considered an HRA Plan Document or HRA Summary Plan Description (SPD). If an HRA exists without a written HRA Plan Document—it is out of compliance.
What are my HRA plan document requirements?
HRA plan documents should contain each of the following:
- Name of the HRA Plan Document Administrator*
- Designation of any Named Fiduciaries other than the HRA Plan Administrator under the claims procedure for deciding benefit appeals*
- A description of the HRA benefits provided
- The standard of review for HRA benefit decisions
- Eligibility criteria (e.g., classes of employees, waiting period for new hires, and hours worked per week)
- The effective date of participation (e.g., next day or first of month following satisfaction of the HRA Plan Document eligibility waiting period)
- Amount the HRA Participant must pay towards the cost of HRA coverage (typically $0)
- HRA Plan Sponsor's amendment and termination rights and procedures, and what happens to HRA Plan assets, if any, in the event of HRA Plan termination*
- Rules restricting and regulating the use of Protected Health Information (PHI), if Plan Sponsor uses PHI
- Coordination of Benefits provisions
- Procedures for allocating and designating administrative duties to an HRA TPA or committee
- How the HRA plan is funded*
- Information regarding COBRA, HIPAA, and other federal mandates*
Where can I get HRA plan documents?
Drafting HRA plan documents is difficult and should be done by professionals. If the documents fail to meet ERISA requirements, the business could face fines of up to $100 per day per employee.
As such, many small businesses contract with an attorney or other legal service to draft HRA plan documents. However, this could cost up to $2,000. Even purchasing pre-written plan documents can cost at least $200—and these documents cannot be amended by the seller if the business decides to alter anything in the benefit.
PeopleKeep software includes: personalized plan documents, free plan amendments, online benefit administration, the ability to easily document reimbursements, and tools that ensure you remain compliant with federal and state rules.