Accountable vs. Non-Accountable Plans

The costs of health care continue to increase, making it harder for individuals, including small business owners, to cover their health care costs. Therefore, it can be beneficial for small businesses to implement medical reimbursement plans, which is fully deductible!

How does a Health Reimbursement Arrangement (HRA) work & what are some benefits?

It allows for employers to fund portions of their employee’s health plan deductibles, coinsurance, copayments as well as cover the cost of other qualified medical expenses such as: medical, vision & dental insurance premiums, eyeglasses/contacts, eye surgery, lab work, medical assistance equipment & more. Some items that don’t qualify are cosmetic surgeries, health club memberships and illegal medical treatments.

What HRA works best for your business?

Traditional HRA’s: group health plans that must be offered in conjunction with a group health insurance policy.

Qualified Small Employer HRA (QSEHRA): type of HRA for groups with fewer than 50 full-time equivalent employees and does not offer a group health insurance plan.

More about QSEHRA’s

  • All payments made through this plan are payroll tax free to both the employer and employee
  • Employees must have minimal essential coverage (i.e. their own health insurance) to receive tax free funds
  • Employees who do not have the minimal essential coverage will report the funds received as taxable income
  • Employers can exclude any of the following employees:
    • Part-time & seasonal
    • Employees who have not worked for over 90 days
    • Employees younger than 25

Remember, for medical reimbursements to be fully compliant, businesses cannot pay for employee’s health care directly and all payments must be substantiated! As an employer, it’s a good idea to put your reimbursement plans in writing in the employee policy and procedures manual.