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Even the smallest businesses can gain a competitive edge in winning and retaining top industry talent if they offer a valuable benefits package. And the number one benefit employees are looking for is clearly health insurance.
Whether your small business has a small HR department or not, the health insurance options on the market today are far too numerous and complex to make an informed decision on without human resources consulting from experienced experts.
Thus, it's highly advisable to keep a reputable human resources consulting firm handy and reach out to them as needed in organizing and administering an employee benefits package.
Here, we want to give just a basic overview of two health insurance options that small businesses often overlook, but that may well be the best solution in your situation.
What Are HRAs And When Should They Be Used?
Stand-alone HRAs (health reimbursement arrangements) used to be an extremely popular way to deal with the costs of healthcare and of health insurance premiums in the decades before ACA was passed - and they're still popular.
But the difference is, now they're restricted, for all practical purposes, to sole proprietorships. Or at least, a one-person HRA is the only practical type of HRA today if your want your plan to be compliant.
An HRA allows for untaxable reimbursement of both your health insurance premiums and your qualifying out of pocket health expenses during the year.
HRAs are fully employer funded and constitute a deduction on the employer side and a tax exempt benefit on the employee side of the equation.
HRAs are very commonly used by C Corps, by one-man-show nonprofit groups, by self-employed entrepreneurs, and by churches.
To set up an HRA, you'll need to define specific healthcare expense categories, decide on how much to put into the plan per month/year, and have a legally valid plan for what to do with any unused funds at year's end.
To ensure your plan is compliant and workable, you'll definitely want to utilize a third-party, human resources consulting firm in the process of setting it up.
When Does It Make Sense To Use An HRP Plan?
When you need something similar to an HRA but have multiple people you need on the plan, an HRP (healthcare reimbursement plan) is likely the best answer.
An HRP is also funded by the employer and offers your business significant tax advantages. And it can also be used to reimburse your employees (tax-free) for their health insurance premiums, if not for out of pocket expenses like the HRA can.
HRPs are very affordable and predictable as to cost. They allow you to keep compliant with more than one person on your employer-based health insurance program and still enjoy many of the benefits of a one-person HRA.
But again, the complexities of setting up an HRP speak in favor of using a knowledgeable HR consultant to ensure you're fully compliant and taking full advantage of every benefit you possibly can.
In some cases, an "ordinary" health insurance package might be a better choice than either an HRA or HRP, which is why you need experience help in navigating your options and matching them to your specific business and personal situation.
To find out more about your various employer-based health insurance options, do not hesitate to contact Summerlin Benefits Consulting for assistance today!