hi Lee Phillips again and I want to talk to you about what is an HRA it's called
a Health Reimbursement Arrangement or a Health Reimbursement Agreement or whatever you want to
call it it is another type of benefit plan under ERISA the Employee Retirement Income Security Act
and it's kind of an unusual plan if you have a little company you can
set it up ideally you have employees and and and and they use it you can use it for an individual
owned company one owner one employee it gets a little snakier if you do that but it can be
done this isn't as easy to set up as an HSA health savings account but you can use it the advantage
is you can put as much money as you want into it so you put money in two thousand five thousand
whatever it is ten thousand this year the only restriction is is it's supposed to be reasonable
to meet medical needs well I mean if you break your leg today it can be six million dollars right
so what's reasonable to meet medical needs the catch is when you put the money in from the
company and you do have to include employees you have to include employees in the HSAs too
and all pretty much all of the benefit plans and all of the retirement plans under ERISA
there are restrictions to to prevent you from just providing it to you
and not providing it to the employees so most of you don't have a lot of employees though
you put the money in the company gets a tax deduction that money sits in the account
and you reimburse yourself for health related expenses just like you would at an HSA except
in this case we do not need an insurance company to manage this money the company
sets up their general checking account and then they have another checking account that we call
the HRA accounts in the same bank you move money from general checking over to HRA checking
how much money there's no limit basically you move it over the company gets a deduction for it
it goes into the account and you can use it to reimburse yourself for health qualified
health related expenses that's basically anything that's not an over-the-counter it's the eyeglasses
it's the dentist it's all the medical stuff that you'd normally think of the prescriptions and the
insurance premiums we forgot to tell you that in the HSA the insurance premiums are also included
so it's a way of providing health care insurance and health care reimbursement what it does is it
makes all of your health care stuff not tax deductible but tax free it comes out of the
company the company gets a deduction over into the HRA account you reimburse out of the HRA account
but that comes to you there's no 1099 W-2 nothing it just comes to you as a reimbursement
if the account is ever audited you need all the receipts to explain why we paid money out of
the HRA account this is similar to an HSA in that it's not a 125 there's no use it or lose it rules
if you build money up in the account it stays in the account and the company you can continue to
claim against that money until it's all gone but you can actually build money
in the account you can invest the money in the account it grows in the account tax-free
and you get to control it you get to get it back at any time for health-related expenses tax-free
now if you ever terminate the plan the money in the plan will come to the then participating
employees there's no vesting in this when the employee leaves they don't have a claim
against the money that's been put away for them
so I can keep the plan going and after I close my little company down I won't actually
physically close it down but when I retire all employees in my company they go bye-bye
the account is still there though they didn't take their money with them so you can use this
account for health-related expenses in your old age long-term care all sorts of stuff
or you could terminate the plan and the money in the plan comes to the then participating employees
as income you have to pay income tax on it but you got to pay income tax on your 401k
money and all that stuff when you get it back to your standard IRAs so it really isn't a bad deal
guys and you can spend this money for health related stuff tax free the HRA is a really
cool plan if you can qualify for it it it it's really neat guys so don't forget about the HRA
not as many a pretty much anybody can any little business can qualify for an HSA and the insurance
company is going to set it up for them the HRA more complicated you've got to set it up
and I have a kit that teaches you how to set it up I'm sure you're stunned about that
but you can set it up the company can operate it you don't need third parties there's no tax return
that the HRA files every year like there is a 401k they have to file a tax return but there's no tax
return there's no nothing basically there's an independent banking account that sits here
it's pretty cool guys check it out this is Lee Phillips i'm speaking on HRAs health
reimbursement arrangements agreements whatever you want to call them and don't forget to subscribe