Putting%20the%20Pieces%20Together-%20HRA,%20HSA%20

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Putting the Pieces Together- HRA, HSA FSA-Where
Do They Fit?

• Presented byRob Thurston, President, HR
  Consulting Group, Inc. March 13, 2006

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Putting the Pieces Together

• Basic Plan Designs
• Case Study Review
• Pitfalls in Plan Design
• Where do we go from Here?

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Who will be Covered?

• First Question to ask Who will be covered?
• Health FSA HRA B Any employee, can be employer
  defined
• HSA Any Individual, not entitled to medicare or
  claimed as a tax dependent is enrolled in a
  qualified HDHP

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Is there a Qualified HDHP Plan?

• Be careful B not just any plan will do
• Amounts are indexed B make sure plans will be
  updated to meet annual requirements
• Should the employer offer more than one option?

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How can Employee Pay?

• Health FSA B Employee can pay pre- tax through a
  S125 Cafeteria Plan
• HRA B Employee does not pay into HRA portion,
  however employee can pre-tax the HDHP
• HSA B Employee can pre-tax both the HDHP and the
  HSA contribution through a S125 Cafeteria Plan

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What will Employer Pay?

• Health FSA B should employer make a
  contribution?
• HDHP B will employer increase contribution
  towards HDHP?
• HRA B How much does employer want to put into
  the account?
• HSA B Does employer want to make a contribution
  B warning, money will belong to employee!

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How will Unused Amounts be Handled?

• Health FSA B will employer allow 2 2 month
  extension to pay claims?
• HRA B will employer allow employee to take money
  with them? Will there be a limit placed on the
  liability?
• HSA B if employer money is deposited, will
  employer have problem over loss of control of
  funds?

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What Type of Expenses will Be Eligible?

• Health FSA B should be limited scope or full FSA
  or both?
• HRA B should be limited scope?
• HSA B employer has no control here
• Coordination if all three are present

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Company Culture

• How will plan design be viewed by employees?
• What is normal communication process used?
• What goals are being set by Corporation?

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Case Study 1

• Small Employer under 100 lives
• Did not have HDHP that qualified for HSA
• Goal was to minimize rate increases (2005 has
  23 rate increase)

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Case Study 1

• Went with PPO plan with 3,000/5,500 Deductible
  and 5,000/10,000 OOP
• Had general purpose FSA and Dental Plan
• Wanted more control over money, did not want to
  contribute to HSA

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Case Study 1

• Lets Look at Single Coverage Design
• Health FSA B Employee can contribute up to 1800
  B FSA pays first
• HRA B Employer contributes 1200
• HDHP B Expenses covered by Insurance
• OOP B Employee exposure 2,000

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Case Study 2

• 1500 employees, multiple locations located
  nationwide
• Went from self-funded PPO HMO option to HDHP
• Offered 2 Self-funded HDHP designs
• High Option has 1000/2000 Deductible and
  3000/6000 OOP Max
• Low Option has 2000/3000 Deductible and
  5100/10200 OOP Max

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Case Study 2

• Offered 2 FSA Plans, Limited Scope Full FSA
• Had S125 Plan including HDHP, FSA, Dental and
  Vision
• Added HSA in 2005 Plan Year

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Case Study 2

• Slight Drop in FSA Participation
• 63 Elected to Participate in HSA with average
  monthly contribution of 75
• Majority elected High Option, even though
  premium was higher
• Claims decreased by 43

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Case Study 2

• Employer exceeded goal of reducing claim cost and
  minimizing premium increases
• Installation was not without problems Employee
  view, HSA Trustee Issues Increased workload for
  HR Staff
• Corporate concerned that employees are not
  getting healthcare when needed

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Case Study 2

• In 2006, added a third option to plan that did
  not qualify for HSA (500 Deductible)
• Premium did not increase for 2006
• Employees did not go to lower deductible plan B
  most stayed with what they had in 2005

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Caution B Avoid These Potholes!

• Mid-Year Changes
• HSA can be added mid-plan year, but this can be
  messy and some options are still being discussed
  by IRS (i.e. changing to a limited scope FSA,
  may not be valid)
• Non-Discrimination
• Before making contributions to an HSA, an
  employer should be sure to review the
  comparability rules...if it is not part of a
  S125 Cafeteria Plan

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Caution B Avoid These Potholes

• COBRA applies to HRA's
• This can increase liability in case of divorce as
  the full balance of the account must be
  available to both the employee and ex-spouse
• ERISA
• Make sure that all plan documents, SPD's and
  employee communications are accurate---watch for
  ERISA wording that can make a non-ERISA HSA and
  ERISA plan by inference

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Questions?

• For more information, contact
• Rob Thurston, HR Consulting Group, Inc.
• [phone]
• hrconsultinggroup_at_msn.com