HRA: 3 Administration Questions

What is the name of your state?Michigan. I have taken over the administration of a Health Reimbursement Arrangement plan (as defined under IRS Notice 2002-45; claims are paid from general funds) for a 24-28 employee company . I have 3 questions I would appreciate others’ input and experience on:

(1) The company’s plan allows an additional $2,000 for pregnancy-related expenses. Due to the obvious time frame of pregnancy, can this additional benefit be spread over two “periods of coverage”? That is, normally the yearly dollar amount available is for coverage of dates of service within that year and participants must submit claims by March 31 for the prior year. Unused amounts are not rolled over. However, this would be a problem with the add’l $2,000; for instance, if someone got pregnant in October and submitted claims for prenatal care and for the subsequent birth in June, the balance of the $2,000 has effectively ‘rolled over’ which is not allowed. (The company’s intent is one add’l amount $2,000 per pregnancy, not $2,000 for each year the pregnancy spans.) The time frame for using the $2,000 is not specified by the Company. Would the IRS have problems with the company allowing the extra $2,000 to be available from, say, the time of the knowledge of being pregnant through 3 months following the date of birth?

(2) The prior administrator paid many duplicate and ineligible claims. It is, therefore, coming as a surprise to some participants that each claim must include a date of service, amount, patient name, and description of service. Regarding prescriptions, a participant is balking at providing the names of medications. It is being argued that the prescription number should be adequate since it is unique. While this is true, reviewing numbers versus names would make administration more difficult and make accidental duplicate payments more likely and potential fraud easier (it’s probably easier to provide a copy of an altered prescription number, making it look like another prescription, than to create one with a different medication name). And yet I can understand the privacy/confidentiality concern. Any thoughts?

(3) Any good seminars out there and/or sources that get into practical administration details for HRAs? I can find general information but am having difficulty finding anything addressing actual day-to-day administration.

There is a reason why most employers out-source administration of their Flex Plan, HSA, HRA, etc. Compliance with the relevant tax laws and ever-changing DOL guidelines is very complicated. It sounds like your Plan has been out of compliance for quite some time and if it's audited by the State or federal DOL or IRS, you may be looking at some penalties to the company and consequences to the participating employees - such as having the Plan invalidated and all monies deferred into the HRA for the past several years declared taxable income. Ouch.

I haven't ventured down the HRA path sufficiently to competently answer your questions and I don't know that any regular responders here have either. You need to consult with an expert and get your Plan in compliance asap. Nearly any benefit consulting house can offer you assistance (at a national level, those would include Towers-Perin or Hewitt for example) and you undoubtly have smaller "boutique" benefit consulting groups in any larger city in Michgan.

If you know any HR people or benefit managers in other companies in your locale, give them a call and see who they use. If you don't know any, then get out your local phone book, call the nearest larger-sized employer and ask to speak to someone in HR/benefits - introduce yourself and ask who they're using for Plan administration services and/or their benefit consulting group.

Sounds like you've been handed a real mess. You need some expert assistance digging out. Good luck.

P.S. Another resource would be SHRM - the Society for Human Resources Management. www.SHRM.org. You'll likely find considerable information on this topic and they have a variety of bulletin boards - one is dedicated exclusively to benefit topics. Membership isn't free although it's modest (approx $145 if I recall correctly.) Many thousands of HR and benefit professionals belong and you're far more likely to get expert answers to your questions there.