Establishing an HRA

What is required to establish an HRA?

Employers simply complete a Sterling questionnaire application to establish the HRA plan design, setting the rules for how they want the HRA to benefit their employees. This includes information about coverage tiers, funding amounts and frequency, how funds can be used and whether dependents are covered, debit card orders, etc.

Employers also have their employees complete a short application with information about themselves and their dependents, if covered under the HRA plan.

Once these documents are submitted to Sterling with funds to establish the HRA, Sterling produces and sends to the employer all documents for the HRA – Adoption Agreement, Basic Plan Document, Board Resolution, and Summary Plan Description (SPD).

The SPD must be distributed to all employees in hard or soft copy and all other documents must be kept on file by the employer.

What plans are covered?

Employers choose what health plans to combine with an HRA – carrier approved HMOs or traditional and high deductible PPOs.

What other "rules" do employers set for the HRA?

Employers choose HRAs because they have broad latitude to establish the rules for contributions and reimbursements. They can change the rules as business conditions dictate. For example, employers can choose:

• How much to reimburse, in what amounts and in what order. They can decide if they or the employee will pay first.
• When to reimburse. Employers can decide to fund monthly, quarterly or annually and in which plan year. They can also set a funding limit so that additional funding isn't allowed until the account balance falls below the limit.
• What to reimburse – just the deductible or a broad range of healthcare expenses defined in Section 213(d) of the IRS code.
• If funds will rollover to the next plan year.
• Who to cover – employees only or employees and their dependents.