Part of the reason is cost (the proprietary software and technology usedīy these third party administrators is still expensive) and part of the reason While most large employers use these plans, most small businesses with HRAs do Payment to the medical provider at the same time that the claim is validated. Ideally, HRA administrators validate claims in "real time" and issue the Reimbursement is disbursed by the business. That when an employee presents a request for reimbursement in the properįormat (usually with a receipt and written explanation), the cash The same manner as an employee travel expense reimbursement. For example, anĮmployee health expense reimbursement would be handled by a business in The same way as other business expense reimbursements. Originally HRA plan accounting was intended to operate in Procedures quire that some provision be made for that contingent Usually does not pay that amount, but generally accepted accounting Liabilities also remain with the employer that are often more than half Unfortunately thisĪlso means that the potential liabilities for wages taxes and related Requirements for tax-free distribution to employees. Responsible for all wage taxes until the point where the funds meet the The basic premise of HRAs is that theįunding is provided solely by the employer and the employer is Reimbursement Arrangements (HRAs) are unique in both an accounting andĮmployee benefits perspective in that the responsibility for accounting Running afoul of other rules could be even more damaging. Requirements in a tax audit could mean paying a substantial tax penalty. Self-administered HRA, employers must pay attention to the rulesĮstablished by the Department of Labor and the IRS. Self-administered, while larger firms hire employee benefits firms with Small businesses try to costĬosts in many areas, including HRAs. Large firms spend, on average, twice theĪmount per employee on health benefits. The basic difference between the health plans of small firms and those Reimbursement Arrangements are gaining acceptance among smallīusinesses, too many are ignoring this basic accounting rule and willĮventually face adverse tax consequences. While the new type of health plans known as Health Or conversion to Flexible Spending Account (FSA) may also provide someĪ basic principle of good accounting procedures is that the cost ofĮxecuting the procedure should never exceed the value of its expectedīenefits. A transfer to a Health Savings Account (HSA) Should allow for an additional future expense related to wage taxes on Small businesses who administer their own Health ReimbursementĪrrangement (HRA) plans should avoid making advance payments toĮmployees if possible but when this practice is used then the employer
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