Putting the Pieces Together- HRA, HSA &

FSA-Where Do They Fit?

Presented by

Rob Thurston, President, HR Consulting Group, Inc.

March 13, 2006

Putting the Pieces TogetherPBasic Plan DesignsPCase Study Review

PPitfalls in Plan DesignPWhere do we go from Here?

Who will be Covered?PFirst Question to ask: Who will

be covered?PHealth FSA & HRA B Any

employee, can be employer defined

PHSA Any Individual, not entitled to medicare or claimed as a tax

dependent & is enrolled in a qualified HDHP

Is there a Qualified HDHP Plan?

PBe careful B not just any plan will do

PAmounts are indexed B make sure plans will be updated to meet

annual requirementsPShould the employer offer more

than one option?

How can Employee Pay?PHealth FSA B Employee can pay

pre- tax through a S125 Cafeteria Plan

PHRA B Employee does not pay into HRA portion, however

employee can pre-tax the HDHPPHSA B Employee can pre-tax both the HDHP and the HSA contribution through a S125

Cafeteria Plan

What will Employer Pay?PHealth FSA B should employer

make a contribution?PHDHP B will employer increase contribution towards HDHP?

PHRA B How much does employer want to put into the account?PHSA B Does employer want to

make a contribution B warning, money will belong to employee!

How will Unused Amounts be Handled?

PHealth FSA B will employer allow 2 2 month extension to pay

claims?PHRA B will employer allow

employee to take money with them? Will there be a limit placed

on the liability?PHSA B if employer money is

deposited, will employer have problem over loss of control of

funds?

What Type of Expenses will Be Eligible?

PHealth FSA B should be limited scope or full FSA or both?

PHRA B should be limited scope?PHSA B employer has no control

herePCoordination if all three are

present

Company CulturePHow will plan design be viewed

by employees?PWhat is normal communication

process used?PWhat goals are being set by

Corporation?

Case Study 1PSmall Employer under 100 livesPDid not have HDHP that qualified

for HSAPGoal was to minimize rate

increases (2005 has 23% rate increase)

Case Study 1PWent with PPO plan with

$3,000/$5,500 Deductible and $5,000/$10,000 OOP

PHad general purpose FSA and Dental Plan

PWanted more control over money, did not want to contribute

to HSA

Case Study 1PLets Look at Single Coverage

Design:

PHealth FSA B Employee can contribute up to $1800 B FSA pays

firstPHRA B Employer contributes

$1200PHDHP B Expenses covered by

InsurancePOOP B Employee exposure

$2,000

Case Study 2P1500 employees, multiple

locations located nationwidePWent from self-funded PPO &

HMO option to HDHPPOffered 2 Self-funded HDHP

designs:BHigh Option has $1000/$2000

Deductible and $3000/$6000 OOP MaxBLow Option has $2000/$3000

Deductible and $5100/$10200 OOP Max

Case Study 2POffered 2 FSA Plans, Limited

Scope & Full FSAPHad S125 Plan including HDHP,

FSA, Dental and VisionPAdded HSA in 2005 Plan Year

Case Study 2PSlight Drop in FSA ParticipationP63% Elected to Participate in HSA with average monthly

contribution of $75PMajority elected High Option,

even though premium was higherPClaims decreased by 43%

Case Study 2PEmployer exceeded goal of reducing claim cost and minimizing premium

increasesPInstallation was not without

problems: Employee view, HSA Trustee Issues & Increased workload

for HR StaffPCorporate concerned that employees

are not getting healthcare when needed

Case Study 2PIn 2006, added a third option to plan that did not qualify for HSA

($500 Deductible)PPremium did not increase for

2006PEmployees did not go to lower deductible plan B most stayed

with what they had in 2005

Caution B Avoid These Potholes!PMid-Year Changes

BHSA can be added mid-plan year, but this can be messy and some options are still being

discussed by IRS (i.e. changing to a limited scope FSA, may not be valid)

PNon-DiscriminationBBefore making contributions to an HSA, an

employer should be sure to review the comparability rules...if it is not part of a S125

Cafeteria Plan

Caution B Avoid These Potholes

PCOBRA applies to HRA'sBThis can increase liability in case of divorce as the full balance of the account must be

available to both the employee and ex-spouse

PERISABMake sure that all plan documents, SPD's

and employee communications are accurate---watch for ERISA wording that can make a non-

ERISA HSA and ERISA plan by inference

Questions?PFor more information, contact:PRob Thurston, HR Consulting Group,

Inc.P(801) 765-4417

Phrconsultinggroup@msn.com