How to make sure that your HRA is compatible with 2020 HAS rules

We have not only entered a new year, but a new decade too, and with that comes a new set of rules and regulations to adhere to. Any employer who is looking at introducing a High Deductible Health Plan using an HAS (Health Savings Account) must first check that their current HRA(Health Reimbursement Arrangement) is compatible.

However, even if an employer finds that their current HRA is compatible with an HSA, they must still diligently review their existing plans. The new decade has introduced new minimum required deductibles for HAS, meaning updates may be needed at renewal to ensure that employees can continue to make/receive HAS contributions.

Here are the top four things to bear in mind this new year:

Tax advantages and money savings using stacked plans –

Implementing an HRA can save money on employee benefit costs, for example, plans with higher deductibles can result in lower employer-paid premiums for health insurance. This allows the employer to save money by self-funding some of their more expensive out-of-pocket costs. Not only this, but it also simultaneously provides increased benefits to the employees too. By combining an HRA with an HAS, employers can then expand tax savings on the end of both employee and employer. Any medical cost reimbursement becomes tax free and non-inclusive for gross wages. Similarly, any cafeteria plan HAS contributions, both from employers and employees, are non-inclusive in gross wages and are pre-tax. This amounts to payroll tax savings on both an employer and employee level.

High Deductible Health Plan –

The minimum deductible seen in 2020 for HSA-qualified HDHP will rise to $1,400 (single coverage) or $2,800 (family coverage). In 2019, these prices were set at $1,350 and $2,700 respectively. In 2020, the out-of-pocket maximum will rise to $6,900 (single coverage) and $13,800 (family coverage). In 2019, these prices were set at $6,750 and $13,500 respectively. If an HDHP is HSA-qualified, employers must pay the deductible in full pre-coverage.

How HAS eligibility can be voided –

An individual can be ineligible to open/add to an HSA if they are using any disqualifying coverage. Medical care first dollar coverage can result in such a void eligibility. This also leaves the induvial exempt from receiving employer HSA contributions. Disqualifying coverage can include things such as: other group health plan coverage with a below-minimum deductible, an individual’s FSA, an individual’s spouse’s FSA, Medicare, and more.

HRA criteria for HSA compatibility –

An employer must incur $1,400 (single) or $2,800 (family) at a minimum for their deductible (out-of-pocket expense) before medical expenses can be reimbursed. Family plan embedded deductibles may result in an individual not being reimbursed until the whole family has met the $2,800. Individuals will not be HSA eligible if their HRA does not reach the minimum deductibles.