A spending account only saves money if the paperwork behind it works.
Flexible spending and health reimbursement arrangements are simple in concept and easy to administer badly. Almost every employee complaint in this area traces back to one of three things: a substantiation request nobody explained, a deadline nobody published, or a card that stopped working in a pharmacy. None of those are plan design problems. They are administration problems.
Four mechanics decide whether an account runs quietly.
These are the provisions employees feel, and the ones most often left at whatever the prior administrator had set.
Substantiation
Card transactions that are not automatically matched have to be documented. An account that does not chase substantiation promptly ends the year with suspended cards and, eventually, amounts that have to be treated as taxable income. Most of the fix is configuration: automatic substantiation for copays and pharmacy claims, reminders on a set schedule, and a clear point at which a card is suspended. We check those settings when we choose or review the administrator, because the defaults are rarely what the employer would pick.
Carryover or Grace Period, Not Both
A health FSA may allow a limited carryover of unused funds into the next year or a grace period to incur new expenses — it cannot have both. Employers regularly believe they have both because nobody ever read the document.
Runout, Which Is Different Again
The runout period is time to submit claims already incurred, not time to spend. Explaining those three windows clearly at enrollment prevents most of the forfeitures employees are angry about later. The usual mistake is publishing one date and calling it the deadline. We make sure the enrollment material shows the last day to incur an expense and the last day to submit a claim as two separate dates, matching the plan document.
COBRA, Which Most Employers Get Wrong
A health FSA is a group health plan, so COBRA applies to it. The obligation is usually limited rather than absent: where the benefits are excepted benefits and the maximum the FSA can charge for a year of continuation is at least the maximum benefit available, coverage need only be offered through the end of the plan year the qualifying event fell in, and only where the employee has more benefit left than premium. Most employers do one of two things — offer nothing, or offer a full eighteen months. Both are wrong.
This plan year the health FSA salary reduction limit is $3,400, with up to $680 carrying into the next year. The full set of indexed figures sits on the compliance page.
An HRA is a plan, not a perk.
Health reimbursement arrangements are employer-funded and employer-owned, which makes them flexible — and makes them a group health plan with the obligations that follow.
Design Choices That Matter
What it sits behind (deductible, copays, specific categories), whether unused amounts roll forward, and who is eligible. A deductible-gap HRA can deliver a richer employee experience than a lower-deductible plan at a lower total cost — if the utilization assumption is honest.
It Carries Plan Obligations
An HRA generally brings continuation rights, plan documents and disclosure duties with it, and the PCORI fee is typically owed on it. Employers who treat it as a reimbursement practice rather than a plan discover this late. The carrier pays the PCORI fee for an insured medical plan, but not for the HRA sitting beside it, so that one falls to the employer. We put the HRA’s document, notices and fee on the calendar when the account is set up, not after someone asks.
Ownership Structures
Section 105 arrangements for small-business and farm ownership structures can be legitimate and valuable, and they are also the designs most often built wrong. They get documented properly or not at all. The design turns on the entity type, because sole proprietors, partners and most S corporation owners are not treated as employees for these plans, and each is taxed on reimbursements in its own way. We confirm the structure before the plan is drafted and keep the document, the employment records and the reimbursements consistent with each other.
There is more than one kind of HRA, and size decides several of them.
Each arrangement has its own rules about who can offer it, what it can reimburse and whether a group plan has to sit beside it. Picking the wrong one is the most common HRA mistake, so the choice is made before the plan document is drafted.
Small Employer HRA
For employers with fewer than fifty full-time employees and no group health plan. It reimburses individual premiums and medical expenses up to an annual limit the IRS sets each year. For 2026 the limits are $6,450 for employee-only coverage and $13,100 for family coverage. Employees get written notice ahead of the plan year, and the reimbursement reduces any premium tax credit they would otherwise receive. We cover the setup in more detail on our page about how a QSEHRA works.
Individual Coverage HRA
Reimburses individual-market premiums by employee class, at any size, and can replace a group plan or run beside it for different classes. Permitted classes include full-time, part-time, salaried, hourly and work location, and no employee can be offered both the group plan and the HRA. At 50 or more full-time employees, affordability is tested against the lowest-cost silver plan where the employee lives, so we map the classes before anything is priced.
Excepted Benefit HRA
Offered alongside a group plan, it reimburses premiums for dental, vision and short-term coverage plus eligible expenses, up to an annual limit, even for employees who decline the group plan. The employee does not have to enroll in the group plan, but the employer has to offer it to them. It cannot reimburse individual medical premiums, which is where employers confuse it with an individual coverage HRA.
Medicare and Retiree HRAs
Employer-funded accounts that reimburse premiums such as Medicare Part B and Part D for retirees, and for Medicare-eligible employees where the Medicare secondary payer rules allow it. For active employees at an employer with 20 or more employees, those rules generally prohibit paying Medicare premiums in place of the group plan, so most of these designs are retiree-only. For retirees, the account lets the employer fund a fixed amount rather than carry a group retiree medical plan.
Owner and Spouse Plans
A plan for a small business owner who employs a spouse as a genuine employee, so family medical costs can be reimbursed through the business. Owners of more than 2% of an S corporation get limited benefit from it. The spouse needs real duties and reasonable pay, documented like any other employee, and the plan then reimburses that employee’s family costs, which include the owner. Attribution rules treat the spouse of an S corporation owner as an owner too, which is why that structure gains little.
Integrated and Purpose-Built HRAs
Integrated HRAs that pay part of a group plan’s deductible, and narrower arrangements for wellness reimbursement, emergency expenses or a spousal incentive. A deductible HRA works only if the claims flow is clear: whether the carrier passes claims to the administrator automatically or employees submit an explanation of benefits themselves. Wellness and spousal-incentive designs need their own review against the wellness program rules before launch.
Routine plans become audit risks quietly.
Nondiscrimination Testing
Cafeteria plans and self-funded arrangements are subject to testing that compares benefits for highly compensated and key employees against everyone else. A plan that has never been tested is not a plan that passes. Testing runs on the census, ideally before the plan year and again near year end, so elections can be adjusted before a failure. When a test fails, highly compensated or key employees can lose the tax benefit on some or all of their elections, depending on which test failed.
Plan Documents That Match Practice
The document, the enrollment material and what the administrator actually does have to say the same thing. Where they diverge, the document governs and the employee is unhappy. The usual gap is a carryover or eligibility rule the administrator changed without an amendment. We compare the three side by side at renewal and fix the document first, since that is the version an auditor reads.
Employees Reach a Person
An employee calling about a denied reimbursement gets someone who can explain the rule, not a ticket number. That is most of the perceived value of these accounts. When a reimbursement stalls, the employee can call us and we work the issue with the administrator until it is resolved. The administrator still decides the claim. Our role is to make sure the rule was applied correctly and explained plainly.
The Form 5500 Nobody Filed
An HRA is an ERISA welfare plan and it counts its own participants. The small-plan exemption reaches plans with fewer than 100 participants at the start of the plan year whose benefits are paid from general assets or through insurance. Cross that line and a Form 5500 is owed on the HRA itself. The exemption never covered the summary plan description, which is the first document an auditor asks for.
What employers ask about FSAs and HRAs.
Why do FSA claims get rejected?
Substantiation. The rules require proof that an expense is eligible, and a card swipe alone frequently is not it — which is how employees come to experience a routine benefit as a paperwork problem. Most rejections clear once the employee sends an itemized receipt or explanation of benefits showing the date, the service and the amount. A card statement on its own is not enough.
Carryover or grace period?
One or the other, never both, and they behave differently. A carryover moves a limited amount into next year; a grace period extends the time to spend this year’s. Runout is a third thing again — the window to submit for a year already ended.
Is an HRA just an account?
No, it is a group health plan, with the obligations that follow. Plan documents, nondiscrimination testing and notices all apply, and an HRA run informally is the version that becomes an audit problem. The informal version usually starts with an owner reimbursing a few employees’ medical bills from the operating account. That is still a plan, just an undocumented one.
FSA and HRA Administration in Bloomfield Hills, Set Up Right
Flexible spending accounts and reimbursement plans are good benefits. But the paperwork can pile up, and employees get frustrated when claims are denied. Many employers searching for FSA and HRA administration in Bloomfield Hills just want the plan to work without landing on HR’s desk.
We are CFH Insurance Consultants, an independent employee benefits consulting firm on Woodward Avenue since 2007. We are not the administrator. We find, set up and oversee the administrator, and we hold it to its contract.
FSA & HRA Administration
A flexible spending account, or FSA, lets employees set aside pre-tax pay for medical costs. Many FSAs are “use-it-or-lose-it,” which means unused money is lost at year end. Some plans allow a small carryover or a grace period, depending on how the plan is written.
A health reimbursement arrangement, or HRA, is funded by the employer. It pays back employees for costs such as part of the deductible. Unused HRA money usually stays with the employer.
Both need an outside administrator to check claims and pay reimbursements. Both need a written plan document. Our job is to compare administrators, set up the plan with the right rules, connect it to your medical plan and hold the administrator to its contract. We also help employees when a reimbursement gets stuck. We help keep you ERISA compliant.
What is the difference between an FSA and an HRA?
The main difference is who puts in the money. Employees fund an FSA from their paychecks. The employer funds an HRA. An FSA can cover a wide range of medical costs. An HRA covers only what the employer’s plan allows.
An HRA can also help lower premiums. An employer may pick a plan with a higher deductible and use an HRA to cover part of it. That can cost less than a richer plan. We run the numbers with you before you decide.
Do we need an outside administrator for an FSA or HRA?
In most cases, yes. Handling medical receipts in-house raises privacy concerns and takes a lot of HR time. Mistakes can also put the plan’s tax status at risk. An outside administrator keeps the claims away from your office.
The key is picking the right one and watching it. We compare fees, service and how fast employees get paid. Then we check in through the year.
Common questions
Can an employee have an FSA and an HSA?
Usually not a general-purpose FSA. A limited FSA for dental and vision can work alongside an HSA. A general-purpose FSA counts as other coverage and stops HSA contributions, including a spouse’s FSA that can pay the employee’s expenses. A post-deductible FSA is the other version that works. More on how an FSA interacts with an HSA.
When do employees choose FSA amounts?
At open enrollment in the fall, before the plan year starts. The election generally holds for the whole plan year and changes only after a qualifying event such as marriage or a birth. Employees who guess high risk forfeiting money, so we suggest basing the amount on predictable costs such as prescriptions, dental work and glasses.
Do you only serve Bloomfield Hills?
No. We help with FSA and HRA administration in Bloomfield Hills, Birmingham, Southfield, Rochester Hills and across the whole state of Michigan. Accounts are set up and overseen remotely, so an employer’s location rarely limits what we can do. We also have offices in Colorado Springs and Houston.
Talk to us about FSA and HRA administration in Bloomfield Hills
Book a 30-minute call or send us your renewal, and we will review how your accounts are set up today. Our office is at 41000 Woodward Avenue, Suite 350 East, Bloomfield Hills, MI 48304. Call 248.370.8853.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.
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