By Ric Joyner, MBA, CEBS, GBA, CFCI–CEO, eflexgroup.com
I will be answering these questions in more detail in another post that can be used as a white paper.
No, defined contribution is not dead and in fact, will be used extensively by small groups to off-load the burden of their health insurance to employees thus capping their costs for the future. “Well Ric, that is nice but how do we make it pre-tax?” This question has come to me a lot this week and leaves me scratching my head on why it is EVEN a question. Until, I realized that the questioners are confused. HRAs are a great tool and product for employer funds to purchase medical insurance or reimburse medical expenses. But was never my first choice for a solution to tax free either or both. We always used these a PRA and Health FSA accounts for defined contribution.
PRA-Premium Reimbursement Account under a section 125 plan. This can still be used even with the regulation change. If you are not familiar with this tool it is under a section 125 document and is an account that can reimburse insurance premiums that qualify for section 213d deductions. See https://www.eflexgroup.com/forms/FSA/index.aspx for an eflex worksheet that shows how this account works. Also the neat thing about this account is that BOTH the employer and employee can put money into the account. “Ric, this account doesn’t rollover from year to year.” Right, it has the use it or lose it rule but the employers we installed it in say that actually works better because they don’t want unused premiums being rolled over.
Yes, an HRA can still be used as a tool to pre-tax health premiums. It can’t be used to replace qualified coverage under ACA. That makes perfect sense to me.
And no, POP plans are not dead.
We are going to go into more depth next week so stay tuned. Here is something to noodle about. With this regulation added, group health brokers should be ecstatic. Why? Because it may help prevent your group from being lost to another broker selling individual.
Coming soon. eflex fully integrated exchange for brokers.