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Defined Benefit Plans: How HRAs are the Solution to Rising Small Group Health Insurance Costs
Discover How A Defined Contribution Self-Administered HRA Plan Can Save Your Company $8000+ Per Employee, Every Year!
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The enactment of the new health care reform law, along with rising group health insurance premiums, has rapidly increased the number of businesses using a Self-Administered HRA to provide employee benefits. An HRA allows you to reimburse your employees for health insurance and out-of-pocket medical expenses as a tax-free fringe benefit. This will enable them to have permanent individual coverage, and for you to potentially cut your business’ benefit expenses in half. When an HRA is set up as part of a Defined Contribution Plan, the business can define exactly how much it will spend on employee benefits. This can be a big benefit when planning the annual budget. Employees can use their benefit reimbursement to pay for health insurance premiums, dental coverage, or whatever else the business may decide it wants to reimburse. |
Because employees with pre-existing conditions can now join a federal risk pool, and by 2014 will be able to sign up for individual coverage regardless of pre-existing conditions, there is no longer any benefit to them being on a group plan. The new health care reform law also offers large federal subsidies to employees earning up to 400% of the federal poverty level (up to $88,200 for a family of four), as long as they are not offered employer-provided coverage.
What is a Defined Contribution Plan?
A Defined Contribution Plan is simply an arrangement where an employer reimburses employees tax-free for qualified medical expenses, including health insurance premiums. The employer can define how much they are willing to contribute per month, and the employee is reimbursed through a health reimbursement arrangement, or HRA. HRAs are also known as Section 105 plans, named after the section in the U.S. Tax Code that governs them. Administration is totally handled for you, and simply involves tracking and reimbursing employees for their qualified expenses, as defined by the business when creating the Plan Documents.
According to IRS Publication 9691, “HRAs are employer-established benefit plans. These may be offered in conjunction with other employer-provided health benefits. Employers have complete flexibility to offer various combinations of benefits in designing their plans. You do not have to be covered under any other health care plan to participate.”
Learn More – Free HRA Report
For more information about how to set up a Defined Contribution Plan for your business using a Health Reimbursement Arrangement, request a copy of our free report, Defined Contribution Plans and Section 105 HRAs: The New Solution To Small Group Health Insurance.
