If you’re interested in establishing a Small Business HRA for your company, you might feel overwhelmed by the idea of implementing something new. When you break the process down step by step, however, it’s easy to see that setting up a health reimbursement arrangement (HRA) is not nearly as intimidating as you might think - particularly if you use a software platform to help you get started.
We’ve broken the process down into seven steps that are simple to follow and easy to understand.
Step 1: Pick a Start Date
The first step is straightforward: you need set a start date. If your company doesn’t have any type of health plan at the moment, you can begin your HRA as soon as you want. However, if you already have a plan in place, you’ll need to cancel it before setting your HRA in motion.
Step 2: Set a Cancellation Date for Your Group Policy
Step two applies only if you already have a group health plan in place. If you do, you should schedule its cancellation date to occur before the start date of your HRA. To avoid any gaps in coverage, it’s also best to set the cancellation date one day before your HRA begins.
Step 3: Confirm Who Will Be Eligible
Next, decide which employees qualify for the Small Business HRA. You’re required to offer it to any full-time W-2 employee, though you have the option to offer it to part-time workers. However, if you decide to make part-time workers eligible, you must give them the same allowance amounts as full-time employees.
Step 4: Determine a Budget and Set Allowances
Your next step is to decide how much you’ll give employees to reimburse their medical expenses and premium costs. There are a couple of ways you can do this, which we covered in “How to Set a Small Business HRA Budget.”
Step 5: Establish Legal Plan Documents
It’s critically important to comply with both IRS and Department of Labor rules regarding written plan documents for the Small Business HRA. Your legal plan documents are required to cover a variety of subjects, including the amount of monthly allowances, eligibility for reimbursement of expenses, and other policies. Companies that fail to follow the rules face significant penalties, so don’t neglect this step.
Step 6: Communicate Your New Benefit to Employees
If your employees don’t know a new health benefit is available, they’re far less likely to use it. Make sure your workers are aware of your HRA, and give them the information they need to take advantage of it.
Additionally, ERISA rules mandate that employers give their workers a Summary Plan Description. You should let your employees know their annual HRA allowance, steps for applying for premium tax credits, and how to obtain benefits in months when they’re missing minimum essential coverage.
Step 7: Provide Resources to Help Employees Buy Individual Health Insurance
Health insurance policies don’t make for easy reading, and many employees are mystified by the complexities of their health benefits. As their employer, you can be a valuable source of information and support as your employees adjust to your new benefits—just remember that federal rules prohibit businesses from getting involved in employees’ decision making when it comes to choosing a particular provider or policy. In short, you can provide the tools to help employees make informed decisions, but you can’t help them decide.
Setting up a Small Business HRA is a multi-step process that contains some complexities, but is made easier by a thorough understanding of the requirements or the use of a benefits software program.
For comprehensive information about HRAs, and for a step-by-step guide for successfully setting up a Small Business HRA for your company, download our free eBook, The Comprehensive Guide to the Small Business HRA.
Interested in using the Small Business HRA for your company? Let us know your questions in the comments below.