Participant Eligibility
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With few exceptions, almost all employees can participate in an HRA. Exceptions include partners in a business, members of LLCs, and shareholders who own 2% or more in S-corporations. Employers can cover employees only or employees and their dependents, as well as domestic partners as long as they meet the IRS Section 152 definitions. Employers can also choose to provide HRAs to retirees and former employees.

HRAs cannot discriminate in favor of highly compensated employees. Annual nondiscrimination testing is required with an HRA to insure that the employer meets participant eligibility requirements. Sterling offers nondiscrimination testing annually and midway through the plan, if employers request, for compliance.