This should not be taken as legal or tax advice.
"Many employers that self-administer an HRA often overlook important compliance obligations that put them at financial risk. Failure to comply with the following requirements is common and can be costly.
COBRA
An HRA is a group health plan subject to COBRA. Employees that experience a qualifying event are entitled to continue coverage under the employer’s HRA. An employer that fails to extend COBRA coverage to HRA participants can be subject to substantial fines. Employers can be fined up to $110 per day for failure to provide an initial notice or election notice.
HIPAA Privacy
An HRA is a self-funded health plan and governed by the HIPAA Privacy Rules. Employers that offer a fully-insured health plan and sponsor an HRA often overlook their HIPAA Privacy obligations. In order to administer an HRA, the entity processing the claims receives protected health information (PHI) which is protected by HIPAA. Employers that offer a fully-insured health plan will rely on the insurance carrier to comply with the HIPAA Privacy Rules. However, the HRA compliance obligations rest with the employer. Employers that do not comply can be subject to civil penalties of up to $100 per violation.
Medicare Reporting
An HRA is a group health plan subject to Medicare Secondary Payer (MSP) provisions. New reporting requirements went into effect in the fourth quarter of 2010. Employers are required to provide HRA coverage information to the Centers for Medicare and Medicaid Services (CMS). The information reported to CMS will allow better coordination of payer responsibilities between the group health plan and Medicare. Failure to comply could result in fines of up to $1,000 per day.
Plan Documents
An HRA is an employee welfare plan under ERISA. ERISA requires that every [welfare] plan be established and maintained pursuant to a written instrument. The written instrument or plan document serves to define what expenses are eligible for reimbursement, the amount of employer contribution, and whether the funds may be rolled over from year to year. Not only could an enforcement action be brought against an employer for failure to have a plan document, but it is difficult for the employer to prove plan terms and enforce its provisions."
Source: www.hni.com
Note: None of this should be taken as tax or legal advice
Yes.
Health Reimbursement Arrangements (HRAs) are subject to
COBRA requirements (for employers with over 20 employees), meaning employers must allow employees and/or dependents to continue their HRA coverage after termination if they pay the cost themselves.
HRAs, like other group health benefit plans, are subject to the continuation requirements of COBRA. Employers must give terminated employees the option to continue HRA coverage for a period after termination, and may charge the terminated employee up to 102% of the cost of this coverage.
If the participant participated in both the HRA and a group health insurance plan while employed, the employer may require that the terminated participant elect COBRA coverage for the group plan in order to elect COBRA for the HRA. In other words, the employer may give the terminated participant the options of electing: (a) no COBRA, (b) COBRA coverage only for the group health insurance, or (c) COBRA coverage for both the group health insurance and the HRA, but need not give the participant the option of electing COBRA only for the HRA.
For most purposes, terminated participants who have elected COBRA coverage are treated exactly like current, similarly situated employees. They should continue to receive HRA allowances and have the ability to submit new claims just like a current employee. If the HRA plan for current employees is changed or terminated, the change affects any current COBRA participants in the same way. The key difference is that the employer may charge the terminated participant and/or dependents for the cost of their coverage.
In general, an employer may charge a terminated employee and/or dependents monthly up to 102% of the cost of the coverage for a similarly situated individual in the plan. The IRS has not released specific guidelines for calculating the cost of an HRA plan in order to determine COBRA premium, except that the determination may not depend on the participant’s current HRA balance.
Note: None of this should be taken as legal or tax advice.
COBRA provides certain employees, retirees, spouses, former spouses, and dependent children the right to temporarily continue their employer sponsored health benefits (including HRA benefits). Companies, with more than 20 employees, are required to offer COBRA to participants that meet certain qualifying events. In order to participate in COBRA, an employee must pay the full cost of the premium or benefit. COBRA participants are generally eligible for coverage for a maximum of 18 months.
If you're like most people, your health insurance costs a lot more than you'd like. Here are seven things you can do to save a ton of money:
Get your healthy dependents off your group plan
Many employers pay for a significant amount of their employee's premiums, but they don't cover the dependents. If your spouse and/or kids are healthy, chances are good that you can get them individual insurance for much less than it costs to cover them with your group plan.
Ask your employer for a Section 125 Plan
If you already have an individual policy, there may be a way to pay for it tax-free. Employers can offer their employees a Section 125 Plan to pay for individual insurance before taxes and it's completely free for the company. In many states, employers are actually required to provide a 125 plan to anyone that asks. One simple question could save you up to 40% on the cost of your premium, so it's probably worth talking about it with your HR person.
Get a real HSA
A lot of people think that they have an HSA just because they have a high deductible on their insurance. High-deductible plans are not HSAs. An HSA is an actual bank account that lets you save money to help pay for medical expenses tax-free. If you've got a high-deductible plan, set up a real HSA so that you don't have to pay taxes on any of your out-of-pocket expenses.
Find the best agent out there
If you're like me, you buy everything you can online to save money. With individual health insurance, carriers are legally required to charge the same price regardless of how the policy was purchased, so you might as well go out and get some help from a professional. Every insurance agent in your state offers the exact same prices you can find online, so don't be afraid of getting help.
Ask your agent what their commission is
In most states, insurance agents are required to tell you what commissions they make on different policies. As I mentioned above, these commissions don't result in you paying more, but an agent might be motivated to sell you a policy that pays higher commissions. If you know what they make off each policy, it will be easy to tell if they're just trying to sell you the policy that will make them the most money.
Skip COBRA
Conventional wisdom says that if you lose your job, you should go on COBRA right away. If you're healthy, you can almost certainly find an individual policy that offers better coverage for way less money. COBRA is meant to be a last resort, so only use it if you can't get real insurance.
Don't elect COBRA until you need it
Even if you can't find any other insurance options and need to use COBRA, you don't need to actually pay for it until you get sick. You have 60 days before you have to elect into COBRA and another 45 days after that before you have to pay. Once you elect, you receive retroactive coverage. So basically, don't elect until 60 days after you left the company, and don't ever pay unless you actually get sick and need the coverage (or if 105 days passes and you still don't have real insurance). With this loophole, you can be covered by COBRA for 105 days after losing your job without ever paying a dime.
Hopefully you find these tricks helpful. I realize that these are all pretty vague, so feel free to post specific questions in the comments if you're having trouble figuring out how to implement one of these tips. We'll write follow-ups for each one explaining them in more detail.
