Healthcare Savings Accounts (HSAs) and Health Reimbursement Arrangements (HRAs) are tax favored flexible spending accounts that individuals with high deductible health plans may establish to pay for certain medical expenses.
Medical/HSA plan contingency: HSA plans should be built as independent plans. That means it is not configured within the Medical Plan model. That said, Employees must be enrolled in a High Deductible Health Plan in order to enroll in a compatible HSA. In addition, there is a many to 1 ratio for HSA and tied medical plans.
- Ex: One HSA plan may be compatible with several medical plans offered by a company.
It is a best practice to set up all medical plans first, and then set up HSA/HRA plans. This benefit set up process includes the following sections:
- Policy Info (Standard - Same as other plan set up)
- Eligibility (Standard - Same as other plan set up)
- Contributions
- Additional Settings (Standard - Same as other plan set up.)
- Resources (Standard - Same as other plan set up.)
HSA/HRA contribution setup: As described in the Medical Plan set up process, you have an option to tag (mark) a medical plan as HDHP while setting up a medical plan. When setting up HSA/HRA plans, you need to associate compatible medical plans to the HSA/HRA plan under contribution section.
Employer Contribution: If the employer is contributing, switch the “Employer Contributes” button to Yes. Employer can contribute a flat dollar amount (ANNUAL) or the employer can match a percentage of employee’s contribution with an ability set up max contribution dollar amount. Employer can define contributions according to coverage tier. If an employee elects medical without any dependents, the “single annual contribution amount” will be allocated.. If an employee elections one or more dependents, then the “family annual contribution amount” will be allocated.
Employee Contribution: Provide employee’s minimum ANNUAL contribution to enroll.
NOTES:
- The employer’s annual contribution will be calculated based on number of pay deductions for the remainder of the policy. Currently, the system does not support pro-rated calculation. This means if an employee enters in the middle of the year or at the beginning of the year, they both will receive the same total contribution amount from employer at the end of the policy.
- HRA plans do not have employee contributions. It is always the employer's contributions. And employer can contribute only ANNUAL flat dollar amount.