Looking to 2022 with HRAs

With all the craziness and unpredictably of the past couple of years, there is one thing that is still looking strong heading into 2022.  Health Reimbursement Arrangements. 

A Health Reimbursement Arrangement (HRA) is a tool for business owners to increase their tax savings and provide employees with health benefits.  With five different HRAs to choose from, there is an HRA for all business types whether they offer a group health insurance plan, or their employees are responsible for individual health coverage.  Each one helps businesses fend off the rising cost in of health care and provide a more affordable benefits package for their employees. 

According to a Kaiser Family Foundation survey, about 59 percent of employers offer health benefits.  Other employers are unable to afford the cost of group coverage but would like to offer benefits to remain competitive in a tight labor market.  The HRA offers options to virtually every type of employer to offer some form of benefit option in the form of an HRA.  Looking ahead to 2022, BASE® has seen an increase in the number of employers interested in reimbursing employees for individual health insurance coverage with an ICHRA, while also seeing larger employers that are interested in reducing the cost of premiums by implementing an Integrated HRA.  Big or small, there is an IRS-approved HRA to expand benefits for business owners in 2022:

Section 105 HRA

The Section 105 HRA allows for small business owners, who can legitimately hire their spouse, deduct up-to 100% of health care costs, including individual health insurance premiums and qualified out-of-pocket health care expenses as a business expense.  This HRA is for employers classified as a Sole Proprietor, Partnership, C Corp, or S Corp. 

The business owner saves an average of over $5,900 annually in tax savings, helping to reduce the high cost of health care expenses. 

Integrated HRA

The Integrated HRA allows for businesses to couple with a high-deductible health plan to suppress the yearly increases in health care costs.  This HRA is for a business with a group health plan, looking to lower the cost of health insurance premiums, keeping their employees’ coverage the same, and supplementing their deductible costs. 

The employers can reduce the group health insurance premiums by 10-50%, reducing the overall cost of the insured plan. 

Qualified Small Employer HRA (QSEHRA)

The QSEHRA allows small businesses, who do not offer a group health plan, to reimburse employees for their health insurance premiums and health care expenses or just health insurance premiums.  This HRA is for businesses with less than 50 full-time employees who maintain minimum essential coverage (MEC). 

The employers can help their employees pay for their health care coverage, tax-free, with allowance caps, giving more control over the health care costs. 

Individual Coverage HRA (ICHRA)

The ICHRA allows employers to reimburse employees, separated into specific classes for qualified insurance premiums or insurance premiums and out-of-pocket health care expenses.  This HRA is available to any sized business looking to streamline benefits and cut costs without reducing value to their employees’ health benefits. 

The employers can choose the contribution level that works for their budget and save money by not providing a traditional group health plan to all employees. 

Excepted Benefits HRA (EBHRA)

The EBHRA allows employers to reimburse employees an additional $1,800 for premiums paid towards excepted benefits not included in the traditional group health plan.  This HRA is available to businesses with a group health insurance plan in place, but the employees do not have to participate in the group health plan to participate in the EBHRA. 

The employers can maximize savings and tax benefits and expand their health benefits package. 

So, what can we expect for 2022?  The HRA will still be a great option for businesses committed to providing health benefits to their employees while controlling health care costs.  With 5 strong HRAs available, 2022 will set up businesses to save thousands of dollars in tax savings, help their employees pay for health care costs, and provide a great benefits package.  For more information, contact BASE® at 888.386.9680.

When To Complete Non-Discrimination Testing?

Non-Discrimination Testing makes sure there isn’t discrimination between highly compensated employees/key employees and other employees at a company.  With the BASE® NDT, this test takes out the guesswork and demonstrates fairness with respect to eligibility, contributions, or benefits to all employees, keeping the health benefit plans fair for everyone.   

Not only does the IRS suggest doing Non-Discrimination Testing (NDT), but they require it.  It is important to perform the test if employers provide health benefits to their employees.  All employers, regardless of business type or size, are required to perform these tests on their health benefit plans. 

NDT is for all employers who offer health and welfare benefits to their employees and who want to ensure they follow all regulations to maintain their tax-favored status.

When should a business complete a test?  Non-Discrimination Testing should be performed by the last day of the current plan year and include all employees who were employed on any day during that plan year, which for many employers means testing takes place during the 4th quarter of the year.  It is recommended that employers test once early in the plan year or in the middle of the plan year.  This mid-year testing helps determine if any additional steps should be taken to ensure that the employer passes the test by the end of the plan year. 

Testing is required annually, and while the tests focus on participation levels across all employee types within an organization, multiple factors can play a role in that participation and whether a company passes or fails the nondiscrimination test.  Due to the complexity testing presents, employers look to BASE® to help them ensure compliance in handling their Section 125 (includes Flexible Spending Account), Health Reimbursement Arrangement (HRA), and self-insured medical plan (SIMP) Non-Discrimination Testing. Contact BASE® for more information at 888.386.9680.