Health Reimbursement Arrangements, or HSAs, used to be widely popular for smaller businesses due to increased tax savings and tax-free health benefits. Until recently, many companies stopped using HRAs. Now, however,
There Will be No Changes
The U.S. Department of Labor’s New Guidance on Tax-Free Reimbursement of Individual Health Insurance booklet states that reforms apply to plans when there are two or less participants in the program. Group insurance plans should be offered when there are more than two employees using insurance through the company. If there is one person using the stand-alone HRA, then no change is needed on the company’s behalf. The person can continue to use the plan as they normally would.
Benefits of Stand-Alone HRAs
C-Corp businesses most commonly use these types of insurance plans. The business will reimburse employees for their health-care costs. The costs are tax-free, which saves money in the long run. HRA reimbursements can then be written off as a tax-deductible business expense.
Nonprofits and churches usually use HRAs as well. The pastor or executive director of the organization will be the one that is covered under the HRA. They can then get the tax benefits that are associated with having this type of medical coverage. This allows them to get health insurance without having to have a group-insurance plan, which can save a lot of money.
Any type of business can use a stand-alone HRA health-insurance plan, but there are certain ways to ensure it also offers something for other employees.