What are the benefits of the Group Coverage HRA?

 

Budget control

Using the GCHRA, employers are able to save money by setting a reimbursement allowance for employees to use each month toward out-of-pocket expenses, further supplementing their group health plan. In addition, employers are able to set rules for minimum deductibles, cost sharing, and an explanation of benefits (EOB) to further control costs.

Employee retention

With a GCHRA, employers can choose which of the 200+ IRS-regulated out-of-pocket expenses will be eligible for reimbursement. From there, employees can get familiar with their plan and make personal health care decisions. Now, both employers and employees can enjoy the affordable premium of an HDHP alongside tax-free reimbursements through a GCHRA.

Employee choice

The GCHRA is a meaningful health benefit that helps employers attract and retain employees. Aside from salary, health benefits are the top consideration applicants make before accepting a job offer. The GCHRA helps make your HDHP more attractive.

Employee power

Employers offering the GCHRA with PeopleKeep can automate compliance and legal document generation while outsourcing expense verification & documentation review. Most employers spend less than 10 minutes per month managing their GCHRA.

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Supplementing a group coverage plan with a GCHRA

A GCHRA, often called an integrated HRA, is a reimbursement arrangement between an employer and employee designed to help employers supplement the out-of-pocket costs that aren’t covered in the group health insurance plan. Unlike a traditional integrated HRA, employers are not restricted to compatible plans through any individual provider and can keep their HRA even if they change insurance providers.

One common misconception about HRAs is that they are pre-funded accounts, or a separate location for health expenses like an HSA. While some employers choose to have a separate account for accounting and cash flow purposes, this is not necessary in order to receive the tax-free benefits of an HRA.

How does the Group Coverage HRA work?

  1. The employer designs the benefit

    The GCHRA is a strong tool for employers since they are able to set a cap on spending. Once the allowances are set, they cannot be exceeded by employees.With the GCHRA, employers have the unique ability to control costs beyond the allowance by utilizing a deductible. They can set any dollar amount that employees must personally meet with their health care costs before being eligible to receive reimbursements.

    Along with the deductible, employers can choose a percentage that employees are responsible for. This means that with each expense that is considered reimbursable, employers can define a percentage that employees must cover on their end. This is generally referred to as cost-sharing or coinsurance.

  2. Employees make purchases

    After an employee is formally enrolled in the benefit, employees can refer to their employer’s list of approved out- of-pocket expenses, then make health care purchases.

    The most commonly approved expenses for reimbursement are:

    • Medical office visits
    • Prescribed medication
    • Chiropractic care
  3. Employees submit proof of expenses

    After making an eligible purchase, employees submit the necessary documentation to the HRA administrator. PeopleKeep customers submit expenses through the software. Invoices or receipts are typically sufficient, however, some lack the necessary information.

    Documentation must include:

    • A description of the product or service
    • The total cost of the expense
    • The date the employee incurred the expense
    • Doctor’s note (If applicable)
    • Prescription information (if applicable)
  4. Submitted expenses are reviewed and reimbursed

    Once the expense is submitted, a documentation review specialist at PeopleKeep reviews the documentation for the expense to ensure it is qualified and the necessary documentation is included. From there, they ensure the expense does not exceed the employee’s accrued allowance and notifies the employer to make a payment to the employee. Most employers choose to add a separate line item to the payroll check. A separate payment can be made as long as it’s recorded properly.

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The Group Coverage HRA vs. other HRAs

The GCHRA isn’t the first or only health reimbursement arrangement. In fact, employers currently have the option to choose between multiple types of HRAs including: the GCHRA, the individual coverage HRA (ICHRA), and the qualified small employer HRA (QSEHRA).

HRA Comparison Chart

Feature

QSEHRA

ICHRA

Group Coverage HRA

Business size restrictions

Limited to businesses with fewer than 50 FTE employees

None

None

Allowance amount restrictions

Limited to $5,250 for self-only employees and $10,600 for employees with a family in 2020. Businesses cannot give different employees different allowance amounts based on criteria other than family status.

None

No minimum or maximum contribution requirements. Businesses can give different employees different allowance amounts based on job-based criteria.

Group health policy requirements

Can’t be offered with a group health policy

Can be offered with a group health policy, but employees cannot have a choice between the group policy and the HRA.

Must be offered with a group health policy

Individual health policies permitted

Yes

Yes; in fact, they're required for participation in the HRA.

No

Premium tax credit coordination requirements

Employees must reduce their premium tax credit by the amount of their HRA allowance.

Employees cannot collect premium tax credits and participate in the ICHRA. However, if the ICHRA allowance is considered unaffordable, employees may waive the HRA and collect the credits.

N/A. These HRAs can’t reimburse employees for individual premiums.

Annual rollover permitted

Yes

Yes

Yes

Medical expenses available for reimbursement

Any or all items listed in IRS Publication 502

Any or all items listed in IRS Publication 502

Any or all items listed in IRS Publication 502 with the exception of individual insurance premiums

Employee eligibility guidelines

All full-time employees are eligible. Businesses can decide on part-time employee eligibility.

Businesses can decide on eligibility based on 11 different employee classes.

None

Who can participate in the Group Coverage HRA?

Participation in the GCHRA follows most of the same rules for the qualified small employer HRA (QSEHRA) and the individual coverage HRA (ICHRA) but with a few key differences. Because it’s a group coverage HRA, only employees participating in the organization’s group health insurance plan are eligible for the benefit.

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Employee classes for the Group Coverage HRA

Employers can define different classes that offer different features, such as allowance amounts, HRA deductibles, and cost sharing. Classes should be based on definable job related items such as payment structure (e.g. salary vs. hourly), hours worked (part-time vs. full-time), and more.

Setting HRA allowances based on family status

In addition to the 11 formal classes, employers are also able to set allowances based on family status. All employers offering an HRA are subject to anti-discrimination rules.

When it comes to varying allowance amounts on age, businesses can only offer higher allowances to older employees. Businesses 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.

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How to set up a Group Coverage HRA

  1. Pick a start date

    This is the date when the GCHRA will begin.

  2. Confirm the group health insurance policy is active

    Any employer offering a GCHRA must have an active group health insurance plan.

  3. Confirm employee eligibility

    Only employees participating in the organization’s group health insurance policy can participate in the GCHRA.

  4. Determine a budget and set allowances

    Employers offering the GCHRA are not subject to allowance limits like they are with the QSEHRA. Employers are able to use the IRS-approved employee classes to determine allowance amounts.

  5. Define employee classes

    Employers can base eligibility on class membership as long as they use bonafide job-based criteria such as salaried, full-time, hourly, etc.

  6. Establish a deductible amount

    When creating a GCHRA, it’s up to the employer to decide the deductible that will be included for each class of employees. Common deductible amounts set by employers are between $150 and $500. When choosing the deductible amount, it’s important that employers remember that employees also have an insurance deductible to meet. Whatever amount is decided, employees will be required to pay that amount for GCHRA eligible health care themselves before any reimbursements are provided for further expenses.

  7. Establish a cost-sharing amount

    Along with the deductible, employers have the option to add a cost-sharing percentage to their plan. This means they can choose the percentage employees are responsible for covering under each expense. For example, an employer could choose to cover 85% of all expenses up to the total allowance, while employees are required to cover 15 % themselves. Keep in mind these expenses may also be partially covered by insurance.

  8. Define the EOB requirement

    In order to ensure that deductible and cost-sharing amounts are honored, employers can require an EOB from the employee’s insurance provider (the company’s group health insurance). These documents define what amounts were charged to the employee and their payment responsibility.

  9. Establish legal plan documents and compliant administration policies and procedures

    In order for reimbursements through a GCHRA to be tax-free, employers must have compliant legal plan documents. In addition, they must have compliant administration policies and procedures. PeopleKeep offers software to support these processes, since this is where most self-administering employers fall out of compliance with the IRS

  10. Communicate the benefit to employees

    Once the benefit is in place, employers should set standards for communicating the benefit to employees. This should include when the benefit first becomes available, and when new employees are hired.

  11. Follow all stated GCHRA deadlines

    Once the plan documents are written and set in place, employers must follow the rules therein. This includes

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Frequently asked questions about the GCHRA

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What type of group health insurance plan do I have to offer with a GCHRA?

You can offer any group health insurance plan that meets minimum essential coverage (MEC). For maximum savings, it's recommended that you offer a high deductible health plan (HDHP). These plans tend to have lower premium costs and can be supplemented by a GCHRA to create a well-rounded and valuable health benefit.


What can I reimburse employees for with a GCHRA?

You can reimburse employees for any out of pocket medical expenses that fall under IRS Publication 502. Insurance premiums aren't eligible for reimbursement with a GCHRA.


Can business owners participate in the GCHRA?

Depending on how they file, some business owners can participate in a GCHRA as long as they are participating in the group health plan.

Here's how it works:

C-corporation owners

C-corporations are legal entities separate from the owner. This means owners are considered common-law employees of the corporation and are eligible to participate in this benefit. As with all employees, this eligibility extends to the C-corp owner’s family as well. All reimbursements paid to the C-corp owner and the owner’s family are tax-free to the company and the owner.

Sole proprietors

A sole proprietorship is an unincorporated business owned and run by one person. There’s no distinction between the business and owner, so the owner isn't an employee. This means sole proprietors can’t participate.

But, if the owner is married to a W-2 employee of the business, the owner could gain access through their spouse’s allowance as a dependent. All reimbursements would be tax-free to both the sole proprietorship and the owner’s spouse.

Partners

A partnership is a pass-through entity, which means the company isn't subject to income tax. Instead, the partners are directly taxed individually. Partners in a partnership are considered self-employed, rather than employees of the company, so they’re not eligible to participate in a reimbursement benefit.

Similar to sole proprietors, partners can access the benefit if they are married to a W-2 employee of the business, as long as the partner’s spouse isn’t also a business partner.

S-corporation owners

An S-corporation is a pass-through entity, meaning the company isn’t subject to income tax. Instead, shareholders (i.e., owners who own 2 percent or more of the company’s shares) are directly taxed individually. This means shareholders aren’t considered employees and aren’t eligible to participate in a reimbursement benefit.


Where is the money held for GCHRA reimbursements?

The Group Coverage HRA does not require employers to pre-fund an account like a health savings account (HSA). Therefore, employers using the GCHRA with PeopleKeep only need to add a line item to employees’ paychecks.

View our comparison chart: HRA vs. HSA vs. FSA