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Human Resources |
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HEALTH REIMBURSEMENT ARRANGEMENT (HRA) ACCOUNTS
QUESTIONS & ANSWERS
A: $600 will be contributed for eligible IFO members and Administrators.
2. Q: How does the HRA employer contribution get made to my account?
A: On the electronic paystub for the payroll period in which November 1 occurs, you will notice a contribution coded “HRA” in the employer-paid benefits section. Thus, for the 2007 Plan year, you should see the employer contribution on your paystub advice dated November 22, 2006, which is available for viewing online as of November 20, 2006.
3. Q: Since the $600 contribution will be made sometime in November, can I begin to use the HRA then?
A: No. The contribution is for reimbursement of eligible expenses incurred during the following calendar year, so you won’t be able to start using your HRA benefit until after January 1.
4. Q: How do the HRA accounts and the State’s Medical and Dental Expense Account (MDEA) compare?
A: For several years, the State of Minnesota has sponsored the MDEA plan, which allows insurance eligible employees to set up a regular payroll contribution, during Open Enrollment, in order to reimburse for certain out-of-pocket medical and dental expenses for the next calendar year. Only expenses that occur during the course of the same calendar year are reimbursable; any unused monies in the account are forfeited to the plan at the end of the claims period. The MDEA account is optional, and employee payroll contributions are not subject to federal, state, or FICA/Medicare withholding.
The HRA is funded by the Employer and is also used to reimburse the employee for certain out-of-pocket medical and dental expenses. Unlike the MDEA, funds in the HRA account can roll-over from year to year, without being forfeited, as long as the participant continues to be actively employed, or chooses COBRA coverage at termination of employment.
5. Q: Do I have to have a Medical Dental Expense Account (MDEA) in order to participate in the HRA?
A: No. Participation in the MDEA benefit remains optional, but you will want to consider whether or not you intend to use the HRA account in the coming calendar year when you decide how much money to have deducted for the MDEA account. See the response to question #6.
6. Q: Other than the rollover, are there any major differences in how the MDEA and the HRA work?
A: For the most part, the HRA account will reimburse for the same types of expenses as the MDEA. However, the HRA will additionally reimburse faculty for Long-Term Care premium payments and individual (not employer-sponsored) health insurance premiums. The MDEA does not reimburse for Long-Term Care premiums.
If an employee has an MDEA account, it has to be exhausted annually prior to the HRA account. In other words, for most medical expenses, the employee must first seek reimbursement from his/her MDEA account until that account is exhausted before seeking reimbursement from the HRA account. The HRA will reimburse for Long-Term Care premiums even though the employee may have not fully exhausted his/her MDEA account.
7. Q: I understand that the MDEA account can only be used to reimburse for medical/dental expenses that occur in a given Plan year. Is that also the case with an HRA?
A: Yes. Requests for reimbursement for medical expenses from your HRA account must be sought by February 28th of the year following the plan year (i.e., calendar year) in which the medical expense was incurred.
8. Q: I’ve heard that there is a limited amount of money that can be posted to my HRA account. Why is that?
A: The Plan provides that new contributions will not be made to the HRA account if the account equals or exceeds $500 on December 31st. Instead, the Employer will make a $600 contribution to a Health Care Savings Plan (HCSP) account on behalf of the employee. The HCSP is administered by the Minnesota State Retirement System (MSRS). Currently, almost all faculty and MnSCU Administrator severance payments are made into an HCSP account.
Unlike the HRA, the HCSP account is owned by the employee, who can direct the investment of his/her account into any of the State Board of Investment (SBI) funds. The HCSP cannot be used to reimburse for medical/dental expenses while a participant is actively employed. Instead, the HCSP fund is used to pay for these expenses (or for insurance premium expenses) upon separation from State service. Under the IFO agreement and the MnSCU Administrators Plan, the HCSP account is also used, i.e., funded, when eligible employees receive severance payments.
9. Q: How do I insure that the new contribution goes into my HRA account rather than the HCSP account?
A. You must submit a sufficient amount of eligible medical/dental expenses for reimbursement before the end of the year, so that your HRA account balance is under $500 on December 31st. It’s easy to keep track of how much money is in your HRA account; each time you are reimbursed from your HRA account, the claims processing administrator provides you with a statement of your current balance in the HRA account. Additionally, you can contact Eide Bailly, the claims processing administrator, to learn your current HRA account balance.
10: Q: Will I receive any interest on my HRA account?
A: No. HRA accounts are owned by the employer and thus there is no interest credited to individual participant accounts.
11. Q: I’m on a fixed term or interim appointment. What will happen to my HRA if I don’t return to either the IFO unit or a position that is covered by the Administrators Plan at the end of my assignment?
A: Fixed Term faculty and interim administrators who are eligible for the insurance program are also eligible for the HRA. If they do not have any eligible expenses, or do not choose to use the HRA, they will forfeit the amount in their HRA at the conclusion of the claiming period for the plan year in which their employment ends, unless they select either the COBRA coverage, or the alternative to COBRA coverage. Interim administrators who return to the IFO unit, or IFO unit members who move to interim administrator positions in an insurance eligible position will not forfeit their HRA.
If employed for more than one year, it is possible that a fixed term faculty member or interim administrator could also have an HCSP established (see above question). If that is the case, any balance in the participant’s HRA account at the end of the claiming period for the calendar year in which his/her employment ends will be rolled into their HCSP and the account will not be forfeited.
12. Q: What is the “alternative coverage” or “alternative COBRA” plan.
A: Under the HRA Plan document, a participant who terminates employment has the option of continuing the HRA benefit by electing the COBRA continuation benefit. The COBRA benefit is paid by the employee on a monthly basis, at cost, plus a small administrative fee. Alternatively, the employee may choose to continue the HRA benefit until the end of the plan year in which his/her employment ends under the alternative coverage option (this option is sometimes called the “alternative COBRA” option). There is no charge for the alternative coverage option.
Employees who fail to respond to the COBRA notice will forfeit their HRA account balances, unless HCSP accounts have already been established in their name.
13. Q: I’m still confused on how my MDEA and HRA plans work together. Let’s say that I have a total of $400 in my MDEA account and have a balance of $300 in my HRA account. At the end of the Plan year, on December 15, I have some dental work done and it costs me $1,000 in expenses not covered by my insurance. How will I be reimbursed?
A: You would first have to submit your claim for the MDEA account. Once the $400 is depleted, your HRA account will automatically be credited for the balance, $300, unless you check the box on the claim form that indicates you do NOT want your HRA account to reimburse you for the remaining balance. If you choose to submit the claim against your HRA account, you would only be able to collect the balance that is left in the HRA account at the time that your claim is submitted, or $300.
14. Q: But, I will get another deposit in the amount of $600 to my HRA account in the new Plan year, on January 1. Can I use this account to submit yet a third claim on my $1,000 of expenses in the above question?
A: Yes. In the above example, you would have had the following reimbursements made against the $1,000 claim:
Total un-reimbursed dental claim (incurred on December 15): $1,000
MDEA account reimbursement: $ (400)
HRA account reimbursement (prior year): $ (300)
Balance of unreimbursed dental claim on December 31: $ 300
The remaining balance of $300 in un-reimbursed dental expenses is eligible for reimbursement from your 2007 HRA account if you submit the un-reimbursed portion of the dental claim to the claims processing administrator after the 2007 HRA contribution is made (January 1, 2007), but before the end of the 2006 claiming period (February 28, 2007). Since this claim was incurred in the prior Plan year, you will not be able to submit for reimbursement for this expense with your 2007 MDEA account. One note of caution: medical expenses that have been previously reimbursed may not be submitted to the HRA Plan for a second reimbursement.
15. Q: I plan to retire at the end of the academic year. What will happen if I don’t complete the COBRA paperwork when I retire?
A: If you don’t submit the COBRA paperwork you will not be allowed to continue using your HRA account to obtain reimbursement for expenses incurred after the last day of the month in which your employment ends. All eligible claims for reimbursement must be submitted by February 28 of the next calendar year. If you already have a HCSP established (or, if you will have one established due to receipt of severance pay upon retirement), any funds that remain in your HRA will be “swept” into your HCSP at the end of the claiming period following the calendar year in which you retire (i.e., February 28). If you do not have a HCSP established, or will not be eligible for severance pay, your HRA account will be forfeited.
16. Q: If I have in excess of $500 in my HRA when the new annual deposit is scheduled to be made, how will I know if a HCSP was set up for me, or if the additional $600 was deposited if I already have a HCSP account established?
A: If your HRA account balance exceeded $500 when the new deposit was scheduled to be made, your $600 contribution amount will automatically be forwarded to the Minnesota State Retirement System (MSRS), where a HCSP will be established for you. MSRS will contact you shortly thereafter to confirm the account and provide you with further information regarding your investment options. You can check your balances and account information for the HCSP at the MSRS website: www.msrs.state.mn.us or at 800/657-5757 or in the metro area at 651/296-2761. You can check the balances in your HRA account at the Eide Bailly website: www.eidebailly.com or by calling their customer service center at 800/300-1672, or in the metro area at 952/944-6633.
17. Q: My spouse and I are both employed and covered by our own HRA Plans. However, my spouse carries the dependent coverage on the insurance. Who can claim our children’s health related expenses under the HRA?
A: Either spouse can submit claims to their respective HRA accounts for un-reimbursed expenses for dependent children.
18. Q: Do individuals who are on the Annuitant Employment Program (AEP) or the Phased Retirement program qualify for the HRA benefit?
A: Yes. As long as individuals are on either of these programs, they are entitled to full insurance benefits and the HRA regardless of their assigned work schedule, until they terminate participation in the program(s).
19. Q: My paycheck stub indicated that the State contributed $600 to my HRA account in November. Will I be able to submit a claim on January 1 of the new Plan year?
A: Since the HRA Plan rules require that eligible employees be actively employed in an eligible position on January 1, it is necessary for us to reconcile the eligibility lists before claims can be paid. Also, we need to make the determination of which accounts equal or exceed $500, so that the new year's money can be deposited to the Health Care Savings Plan (HCSP), if appropriate. That means that it will typically take about a week or so after January 1 before Eide Bailly receives the final list of those who are eligible. Despite this short delay, all eligible medical expenses incurred on or after January 1 can be reimbursed up to the HRA account balance, so long as you remain a participant in the HRA Plan.