A health reimbursement arrangement (HRA) allows an employer to design a health benefits offering that varies by employee and is not required to be provided to all employees at a company.
Federal regulations (45CFR146.121) state the following:
"A plan or issuer may treat participants as two or more distinct groups of similarly situated individuals if the distinction between or among the groups is based on a bona fide employment-based classification consistent with the employer's usual business practices."
HRA Employment-Based Classifications
The following are the most common ways to create legal HRA employee classes based on bona-fide job differences:
Full-time vs. Part-time
Length of service
Date of hire
HRA Employee Classes and Federal Law
To comply with federal regulations, employee classes within an HRA must:
Treat all "similarly situated" employees equally
Not discriminate against unhealthy individuals
Spell out the requirements for classes and benefits in the ERISA plan document
With salary and other types of compensation, employer routinely compensate groups of employees differently. Since health benefits are such an important part of compensation, why not provide benefits that vary by class of employee?