Using HRAs to Offer Health Insurance to 1099 Contractors
A common question we receive at Zane Benefits is: "Can I Offer a Health Reimbursement Arrangement (HRA) to 1099 Contractors?"
Technically, the answer is no. But, many businesses use our HRA Software to offer health benefits to 1099 contractors. The primary difference is that, unlike W-2 employees, 1099 contractors must report all HRA reimbursements as income on their personal tax return.
Due to its flexibility, hra software can be the ideal health benefits solution for 1099 contractors because:
- The 1099 contractors can only use the money on health insurance and medical expenses;
- Unused amounts remain with the company when the 1099 contractor is no longer working with the company;
- The plans help companies recruit and retain the most talented 1099 contractors.
- Many 1099 contractors can already deduct 100% of the cost of their individual health insurance on their personal tax return.
- The business is not required to pay payroll taxes on the reimbursements.
Note: This should not be taken as legal or tax advice.