Plan Adoption & New Funding
Thinking outside the box has become more important than ever in today’s competitive landscape. Many governmental employers are looking for innovative ways to enhance total compensation and strengthen the financial wellbeing of their employees. This is driven in large part by urgent needs to attract top talent, promote longevity, and retain valued personnel. Current challenges might also include aging workforces, increasing insurance costs, and reduced budgets.
Employees are dealing with everyday issues as well. Many are raising families and struggling to cope with increasing healthcare expenses. Those nearing retirement worry about how they’ll afford to pay their own premiums when they leave employment.
The Gallagher HealthInvest HRA Plan can help and be a valuable tool to help achieve your goals and drive desired outcomes. Here are several common examples:
- Prepare employees for out-of-pocket medical costs, including retiree premiums
- Reward responsible leave time usage
- Reduce unused leave time liability
- Help job-locked employees retire
- Encourage enrollment in lower-cost medical plan
- Ease the impact of increased cost sharing
- Grow wellness plan participation
- Provide an alternative to losing excess benefit dollars
- Offer an early retirement incentive
Whether you’re a brand new group or just looking to expand current funding sources, we’re ready to help deliver winning solutions. Employers win by providing a benefit enhancement with a competitive edge. Employees gain peace of mind knowing they’re in a stronger financial position.
The Gallagher HealthInvest HRA Plan provides several advantages over similar plans:
- No high-deductible health plan (HDHP) requirement like health savings accounts (HSAs);
- No annual use-or-lose or carryover limits like flexible spending account (FSAs);
- No IRS contribution limits like HSAs and FSAs;
- Participant-directed investment fund lineup (similar to 403(b), 457, and 401(k) plans); and
- Survivor benefits for spouses, dependents, and/or named beneficiaries.
Best Tax Advantage
The Gallagher HealthInvest HRA Plan delivers win-win tax savings for employers and employees—even better than tax-deferred 457, 403(b), and 401(k) plans with taxable withdrawals.
- Employers pay no FICA match on contributions (up to 7.65% savings); and
- Employees pay no state income tax (Oregon and Idaho), no federal income tax, and no FICA taxes on contributions, investment earnings (if any), or claim reimbursements (withdrawals). Employee tax savings could be 30-40% or more, depending on their state and individual tax situation.
In many cases, groups start with contributions sourced from funds that would have otherwise been paid to employees as taxable wages. Employers save money by not paying matching FICA taxes in these instances:
- Sick leave, vacation, PTO cash outs (annually and/or upon separation or retirement)
- Mandatory employee contributions (group salary reduction)
- Part or all of a COLA or pay raise
Other common funding sources include:
- Excess or leftover benefit dollars
- Direct employer contributions
Groups might also consider contributions (incentives) triggered by voluntary employee actions. These strategies can help encourage desired behaviors and drive positive outcomes. For example:
- Submit early notice of retirement
- Accept an early retirement offer
- Enroll in lower-cost medical plan
- Opt out of employer-sponsored medical plan
- Participate in wellness plan
- Complete a certain number years of service
Group Decision (Vote)
HRA eligibility and funding are usually subject to collective bargaining or employer policy. IRS rules don’t allow individual elections. Employers and/or employee group leaders typically facilitate some form of a group vote or survey when adopting or adding HRA funding sources.
Download our Group Voting Guide for important information and guidelines. A sample voting ballot, sample memorandum of understanding (union groups), and sample employer policy (non-union groups) are available upon request.
Note that eligibility requirements and funding amounts must not discriminate in favor of employees who are “highly compensated individuals (HCIs).” Our HRA Non-discrimination Information (available upon request) contains more details.
Executive HRA Benefits
You can take your HRA program a step further with our executive “post-separation/premium-only” plan design for your top-level employees, including HCIs. Under this special plan design, HRA eligibility criteria and contribution amounts for your HCIs can be more favorable and exceed what you provide to your non-HCIs. This gives you added flexibility to reward employees without violating applicable non-discrimination rules. For example:
- Provide more valuable and competitive benefits packages
- Reward your executive team
- Offer retirement incentives to senior administrators
All of our standard HRA features and services are included, except that benefits (claims eligibility) is limited to qualified post-separation insurance premiums only.
To learn more, read our Executive HRA Benefits handout.
We’re ready to help guide you through the plan adoption process or simply add new funding sources. Personalized support for decision makers and stakeholders is provided by Gallagher Benefit Services, Inc. Get started today! Contact your Gallagher representative or call our Spokane branch at 1-800-888-8322.