One of the unique benefits of offering a group coverage HRA (GCHRA) alongside your group health insurance plan is that it acts as a supplement to the group health plan.
Through a GCHRA, also referred to as an integrated HRA, employers give their employees a tax-free allowance to spend on the qualifying out-of-pocket medical expenses that aren’t fully covered by the group plan.
However, what if you want to offer a different allowance amount to different employees? Do all employees have to be offered the same benefits? The short answer is, no!
Tailoring your GCHRA allowance amounts to fit different employees is possible through the “employee classes” feature, which allows you to offer unique benefits to different classes of employees.
In this article we’ll answer a few of the most common questions about GCHRA classes, including:
- How do GCHRA employee classes work?
- What are the different classes of employees?
- Are there other ways to alter allowance amounts?
- What are the minimum employee class sizes?
New to the group coverage HRA? Get our comprehensive guide to see what it’s all about
How do GCHRA employee classes work?
Employee classes are a way of separating employees into groups by legitimate job-based criteria, such as full- and part-time status. Employees in different classes can be offered a benefit with different allowance amounts, help for paying deductibles, and cost sharing.
For example, let’s say you want to focus on recruiting and retaining your full-time employees. You can choose to offer only full-time employees assistance with paying for their deductible by creating a full-time GCHRA class so you use your benefits budget to the fullest, focusing on the employees that offer the most value to your organization.
Or, perhaps you want to offer exclusive benefits to employees who have been promoted to a management or executive level position, and offer employees in this class a higher GCHRA allowance than those at the staff level.
All of this is possible through the employee classes feature of a GCHRA!
What are the different classes of employees?
With a GCHRA, there are seven different classes you can divide your employees into, including:
- Full-time employees: Employers can choose whether they define “full-time employment” as averaging 30 hours or more a week, or as averaging 40 hours or more a week.
- Part-time employees: Employers can choose whether to define “part-time employment” as averaging under 40 hours a week or as averaging under 30 hours a week.
- Salaried: Salaried employees are those who are paid on an annual basis and aren't eligible for overtime pay.
- Hourly: Hourly employees are those who are paid on an hourly basis and can earn overtime.
- Manager: Employees who are in management level positions.
- Executive: Employees who are in executive level positions.
- Staff: Employees who are not in leadership positions.
Are there other ways to alter allowance amounts?
Within each class, employers can also choose to alter allowance amounts by the employee’s age and family status. For example, you could offer $500 to full-time employees who are single and $800 to full-time employees who have a family.
When it comes to varying allowance amounts based on age, employers can only offer higher allowances to older employees. Employers can offer allowances to the oldest employees in the class that are up to three times higher than the allowances offered to the youngest employees in the class.
Beyond these customizations of family status and age, you must offer your GCHRA to each employee in the same class on the same terms.
What are the minimum employee class sizes?
When setting up your employee classes, you’ll need to make sure you have at least the minimum number of employees that are required to create an employee class.
Those minimum employee class sizes vary by employer size:
- If you have fewer than 100 employees, you need at least 10 employees in a class.
- If you have between 100 and 200 employees, you need at least 10 percent of the total number of employees in a class.
- If you have more than 200 employees, you need at least 20 employees in a class.
Using employee classes to customize your benefit is an excellent way to make the most of your GCHRA benefit for you and your employees and help them supplement expenses that are not fully paid for in your group plan. While employee classes are entirely optional, using them can be an important tool to ensure you’re using your benefits budgets to the fullest and focusing your efforts on the employees you want to recruit and retain the most.