Pay employees to use a spouse’s plan, instead of charging them to leave yours.
A spousal incentive HRA gives an employee a set amount toward out-of-pocket costs when they enroll in another group health plan, usually a spouse’s, instead of the employer’s plan. The employer spends less on coverage, and the employee keeps a benefit rather than facing a surcharge.
A carrot where many plans use a stick.
Employers that want fewer spouses on the plan usually add a surcharge. An HRA reaches the same goal by paying for the choice instead of penalizing the alternative.
What the Employee Gets
A defined amount each year, reimbursed against deductibles, copays and coinsurance under the spouse’s plan or the employee’s own. The employee pays no tax on reimbursements for medical care under a valid plan.
Where the Savings Come From
Every enrollee who takes the other plan is a premium the employer does not pay and a set of claims it does not carry. The incentive has to cost less than the coverage it replaces, which is arithmetic we run on your census before anyone is asked.
It Has to Be Integrated
Under the Affordable Care Act, an HRA must be paired with group coverage that provides minimum value. A spouse’s group plan can serve, which means the employee has to be enrolled in it and has to be able to show so each year.
Uniform Terms
The offer has to apply to similarly situated employees on the same terms, and because an HRA is self-insured, the Section 105(h) nondiscrimination rules apply. An incentive that mostly benefits highly paid employees can cause trouble.
The Spouse’s Plan Has to Be Real
The design needs a check that the other coverage exists, is employer-sponsored and provides minimum value. Employees confirm at enrollment and each renewal, because coverage that lapses mid-year takes the HRA’s eligibility with it.
Two ways to steer spouses, and when each fits.
Spousal Surcharge
Adds a monthly charge for spouses who have access to other coverage. Simple to run, easy to explain, and often unpopular. It works best where the employer wants the strongest cost effect.
Spousal Incentive HRA
Pays a set amount to employees who take the other plan. Costs the employer something, but is better received, and fits employers who are worried about retention.
Neither
Some plans are better left alone. If spouse enrollment is small, or the plan has few dependents, the admin cost can exceed the saving, and the census usually shows it quickly.
The questions employers ask about spousal incentives.
Five questions that come before we draw a design.
Can we offer one if the spouse’s plan is from a different employer?
Yes. That is the point. The employee has to be enrolled in group coverage that provides minimum value, and you need a way to confirm it.
Is the reimbursement taxable?
Reimbursements of medical expenses under a valid HRA are generally not taxable to the employee, and the employer deducts the cost.
How do we know the spouse really has coverage?
Employees attest at enrollment and renewal, and you can ask for a plan summary or an ID card as proof. The plan document should say what happens if coverage ends.
What if the employee loses the spouse’s coverage mid-year?
A loss of other coverage is a special enrollment event under HIPAA, so the employee can usually enroll in your plan. The HRA ends or changes according to the plan document.
Is this allowed for every employee?
Only on uniform terms. You can define classes, but the offer cannot be built to favor highly compensated employees.
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General information about spousal incentive HRAs, not legal or tax advice. Plan-specific questions belong with your tax adviser or counsel, and we will bring them in.
Related guides.
Contribution Schedule Review
How employer contributions steer enrollment and cost.
HRA and FSA Plan Setup
How reimbursement accounts are designed and kept compliant.
Excepted Benefit HRA
Another account that sits alongside a group plan.
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.
Group Health Plan Market Reforms (26 C.F.R. 54.9815-2711)
The rule that requires HRAs to be integrated with group coverage.
Employer Reimbursement of Medical Care (26 U.S.C. 105)
The rule that excludes employer-paid medical reimbursements from income, and the nondiscrimination test for self-insured plans.
Send us your renewal.
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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.
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