Why Retiree-Only HRAs Are Simpler
An HRA that covers only retirees is generally simpler than one that also covers active employees, because many of the rules written for active-employee health plans do not apply to a plan with fewer than two current participants.
What to know.
A retiree-only plan can usually reimburse Medicare premiums and other medical costs without being integrated with another group plan. The plan still needs to be written and the employer still has to apply it consistently.
Once active employees are added, the plan picks up more requirements. Check with your counsel before extending a retiree plan to active staff.
Where to look next.
Medicare HRA Overview
How the plan works end to end.
Medicare-Eligible Retiree Coverage
Options for retirees on Medicare.
Medicare Secondary Payer Rules
When your plan pays first and when Medicare does.
Where a retiree-only plan helps and where it needs care.
Because a retiree-only HRA is not subject to many of the rules written for active-employee plans, it can be an efficient way to help retirees pay for Medicare premiums and other medical costs. The employer sets the amount, defines who is eligible, and reimburses documented expenses under a written plan.
The plan still has duties. It needs a plan document, consistent eligibility, a claims process and attention to privacy rules for the health information it handles. The line to watch is the one at the top of the page: if a current employee is added, the rules for active-employee plans can apply. Decide in advance whether the plan will ever extend beyond retirees.
Common questions on this topic.
Four questions to settle before you rely on it.
What counts as retiree-only?
A plan that covers retirees and not active employees. Your plan document should say so.
Can it reimburse Medicare premiums?
Generally yes, if the plan terms allow it.
Does it need a group plan underneath?
A retiree-only plan generally does not.
What changes if active employees join?
More rules apply. Ask your counsel first.
Who counts as a retiree for the plan?
Whoever the plan document says, such as former employees who meet an age and service requirement. Define it clearly and apply it the same way to everyone in the class.
Can an employer change the benefit later?
Often yes, if the plan document reserves the right and no contract says otherwise. Check the language and any agreements before announcing changes.
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General information, not legal or tax advice. Plan-specific questions belong with your counsel or CPA, and we will bring them in.
Related guides.
Medicare HRA Premium Reimbursement
The overview this page belongs to.
Compliance Services
How CFH supports the compliance side of your plans.
Why You Cannot Pay Active Employees to Leave the Group Plan
A related question on the same program.
Where the Rules Come From.
The laws and rules named on this page link to the statute or regulation they come from. This is general information, not legal or tax advice, and rules change, so check the current text.
Employer-Provided Health Plans (26 U.S.C. 105)
Rules for amounts received under employer health plans.
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