What is an HRA, FSA, HSA, or POP?

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1 What is an HRA, FSA, HSA, or POP? Health Reimbursement Arrangements - Introduction Health Reimbursement Arrangements (HRAs) are a popular method to help employers control the cost of their health insurance plan while providing choice to employees. Under an HRA, employers can set aside money for each employee to pay for certain health care expenses. Typically, an HRA is used in conjunction with a less expensive higher deductible or co-pay health plan. The higher deductible health care plan provides coverage in the event of a major illness or condition while the HRA provides employees some of the funds necessary to cover routine out of pocket expenses. Features of an HRA HRA funds are tax deductible to the employer HRA funds are tax free to the employee Employer can determine fund availability for specific benefits: medical, Rx, dental, vision, etc. Unused funds can roll-over at the employer s discretion There is no pre-funding requirement an HRA is a pay as you go plan The Advantages of an HRA Implementation of an HRA with a higher deductible health plan will help reduce costs Provides employee choice Creates awareness of the cost of health care Helps to control utilization Provides the employer with a long term health care plan strategy Flexible Spending Accounts - Introduction Flexible Spending Accounts (FSA) allow employees to set aside money on a pre tax basis to pay for out of pocket health care expenses. These expenses may include items subject to the deductible, co-pay or coinsurance of the health care plan, dental, vision, orthodontia, certain alternative treatments and OTC medications. Employees who elect to participate in an FSA plan save money by paying for these goods and services with pre-tax dollars. Money for eligible Dependent Care expenses can also be set aside on a pre-tax basis. By doing so, employees significantly reduce their tax liability thereby saving money. Consider an employee who elects $1000 into a medical FSA and $5000 into a dependent care account. The employee s gross salary is reduced by $6000. If the total tax rate for this employee is 40% then the employee saves $2400.

2 Heath Savings Account Introduction Health Savings Accounts (HSAs) are another popular vehicle to allow employees to use taxfree money to pay for their out-of-pocket medical expenses. HSAs are personal bank accounts owned by the employees and portable between jobs and different employers. In order to contribute money into an HSA, an employee must be enrolled in a HSA-qualified health plan, also known as a High Deductible Health Plan (HDHP). With the Choice Care Card / Mellon HSA, you can take advantage of tremendous tax savings and build a reserve for current and future healthcare expenses. And with your High Deductible Health Plan (HDHP), you can continue to enjoy the security of health care coverage that protects you and your family. Features of an HSA Consider an HSA your health care piggy bank, featuring powerful federal tax advantages All contributions are tax-free, regardless if made by the employer or employee; Potential interest and investment gains accumulate tax-free; Distributions are tax-free when used to pay for qualified medical expenses; and The remaining balance rolls over from year to year, yours to keep regardless of job changes or retirement. In addition to the federal advantages, most states mirror this taxfree status with state tax deductions and/or rebates. Premium Only Plan Introduction Premium Only Plans (POPs) is a limited version of a Section 125 plan that allows employees to pay certain insurance premiums with pre-tax dollars. The employer also saves the matching Social Security and Medicare tax on the dollars spent by the employees under the POP plan. POPs require little or no administration other than maintaining the Plan Document and Summary Plan Descriptions. Employees can use pre-tax dollars to pay a variety of premiums, including: Health Insurance Disability Insurance Group Term Life Insurance Medicare Supplement Insurance Prescription Insurance Accident Insurance Dental Insurance Cancer Insurance Vision Insurance Hospital Indemnity Insurance page 2 of 5

3 Fees HRA Plans Pricing of The Choice Care Card consists of three components. Each is outlined below. The fees are inclusive of debit card administration. The Vermont League of Cities & Towns has secured a FREE MONTH of HRA and/or FSA administration for all municipalities that enroll effective January 1, All VLCT Member Municipalities enrolling after 1/1/10 are still assured a guaranteed low Health Trust member price. Initial Set Up Fee Group set up Enrollment Enrollment kits Debit card production Plan Documents 1-24 ees - $ 250 plus $5 per participating ee ees - $ 500 plus $5 per participating ee ees - $ 750 plus $5 per participating ee 100+ ees - $1000 plus $5 per participating ee Monthly Administrative Fee $8.50 per participating employee for HRA plans (An FSA plan may be added for no additional charge) Debit card usage for purchases Claim substantiation All plan administration Manual claim processing Check production and/or direct deposit Member services Online access for account data Renewal Fee $100 plus $5.00 per participating employee Re-setting of account balances Rollover of account balances Form 5500 $500 per Form For groups with 100+ participants We will provide the necessary information for the Form 5500 as part of our standard services, the additional $500 fee is if we complete and file the form page 3 of 5

4 Fees FSA Plans Pricing of The Choice Care Card consists of three components. Each is outlined below. The fees are inclusive of debit card administration. The Vermont League of Cities & Towns has secured a FREE MONTH of HRA and/or FSA administration for all municipalities that enroll effective January 1, All VLCT Member Municipalities enrolling after 1/1/10 are still assured a guaranteed low Health Trust member price. Initial Set Up Fee Group set up Enrollment Enrollment kits Debit card production Plan Documents 1-24 ees - $ 250 plus $5 per participating ee ees - $ 500 plus $5 per participating ee 50+ ees - $650 Flat Fee (If enrolled in an HRA plan, there is no fee for the FSA) Monthly Administrative Fee Debit card usage for purchases Claim substantiation All plan administration Manual claim processing Check production and/or direct deposit Member services Online access for account data 1-49 ees - $8.00 per participating ee ees - $7.25 per participating ee 100+ ees - $6.50 per participating ee (If enrolled in an HRA plan, there is no fee for the FSA) Renewal Fee $100 plus $5.00 per participating employee Re-setting of account balances Rollover of account balances Form 5500 $500 per Form For groups with 100+ participants We will provide the necessary information for the Form 5500 as part of our standard services, the additional $500 fee is if we complete and file the form page 4 of 5

5 Fees HSA Plans HSA plans have the same pricing as our HRA plans, however an additional set-up fee $20 per HAS participating employee is added for the opening of the bank account with Mellon Bank. Similarly to FSA plans, there is no separate administration fee if an HSA is coupled with an HRA plan. Fees POP Plans / Plan Documents Only Flat $250 per plan This includes both the Plan Document and Summary Plan Descriptions. page 5 of 5