FAQs for Employees & Employers

Claire

Hi there! My name is Clarity Claire
I’m here to assist you in your benefits journey! To help you better understand the benefits, solutions and tools that Clarity offers I've compiled this list of frequently asked questions. I've done my best to answer all your questions, but if anything is not clear, please feel free to chat with us or reach out to our our service or sales team!

What is an HRA? 

Health reimbursement arrangements (HRAs) are tax-advantaged accounts that are funded with employer dollars to pay employee expenses not covered by their health plan. The employer outlines which expenses will be covered in the HRA summary plan document within the limitations outlined by the Internal Revenue Service Publication 969. For example, an HRA could pay all eligible medical expenses, including premiums for health and long-term care insurance, or the HRA could be limited to cover only dental or vision expenses. Although an  HRA can have the option to carry forward unused funds to the future or for retirement, an employee cannot take their HRA funds to a new employer.


What are the benefits of offering an HRA to your employees? 

HRAs benefit much more than just your employees. Offering an HRA helps to lower your health plan expenses by providing your employees with a lower premium plan. This type of plan also offers a multitude of plan design options, allowing you to control the total cost of offering the account. Since HRAs are not pre-funded and are instead a promise-to-pay arrangement, you only pay when an employee files a claim. Plus, given that HRAs provide financial assistance to cover your employees’ eligible out-of-pocket healthcare expenses, you’ll experience better employee morale knowing their employer has them covered.


What makes the Clarity HRA different?

I’m so glad you asked! The Clarity HRA is built to be incredibly flexible. That means you can customize the dollar amount and payment schedule for each individual plan. We’ll work closely with you to determine the plan design that works best for your business and your employees (such as split copay HRAs.) Then throughout the plan year, we’ll provide online tools to monitor the effectiveness of the program. It’s truly a one-of-a-kind HRA experience!


Can my organization offer an HRA alone without a health plan?

Unfortunately, no. It was once a benefits trend in the past to offer employees an HRA they could use to purchase conventional insurance in the individual, non-group market with pre-tax dollars. This approach is no longer possible under section 2711. Although further guidance has not been issued, stand-alone HRAs will not be considered to be integrated coverage that complies with the annual dollar limit required by the ACA.


What is the tax benefit for me as an employer?

Employees aren’t the only ones who benefit from an HRA! Employers can deduct the amount of their HRA contributions. Keep in mind, since the account is funded on a “notional” basis like a line of credit, you can take the deduction only when the amounts are actually paid out to your employees.


Is there a tax benefit for my employees? 

Of course! HRA funds are contributed to employees on a pre-tax basis. That means disbursements are not included when calculating taxable income! For this reason, however, employees can not claim an income tax deduction for an expense that has been reimbursed under the HRA.


What happens to the funds if my employee leaves the company? 

HRA funds are not portable. With the HRA, since you have pledged to pay the funds to your employees on an if-needed basis, any unused funds remain with you, the employer.


How much can I contribute to an employee’s HRA? 

Contribution limits change from year to year based on IRS guidelines. Please visit www.claritybenefitsolutions.com to see this year’s most updated contribution details.


Do HRA contributions have to be made in equal amounts each month?

Not necessarily. An HRA is flexibly designed to make the HRA funds available to eligible employees on Day 1 or in installments throughout the year. No matter what you decide is best for your employees, you always hold the money until qualified expenses are incurred and then reimbursed.


Can employees contribute to an HRA? 

Nope! HRAs are employer-sponsored benefits so only employers may contribute funds. If you would like to give your employees additional opportunities to save for medical expenses (tax-free) consider supplementing an HRA with a Flexible Spending Account (FSA).


As an employer, do I have to contribute the same amount to every employee’s HRA? 

Yes, according to Federal regulations, employer contributions must be comparable for all employees. That means that contributions must be in the same dollar amount for all employees with the same category of coverage. But, you can vary the level of contributions for full-time vs. part-time employees. There may be other variations around comparability, so it’s best to consult your broker, consultant or tax advisor for additional information.


Can owners or partners participate in an HRA? 

Nope. According to IRS guidelines, anyone with two percent or more ownership in a schedule S corporation, LLC, LLP, PC, sole proprietorship, or partnership may not participate in their own HRA. However, C-corporation owners and their families ARE eligible to participate in HRA plans because they are considered to be W-2 common law employees. 


When does the HRA begin to pay for an employee’s expenses?

You decide! You can either allow the HRA to pay before the employee meets any deductible, or it can be set up so that the employee has to meet a certain amount of out-of-pocket expense before the HRA begins to pay. 


Is the HRA allocation based on a calendar year or a rolling plan year? 

Your choice! An HRA can be for a calendar year, plan year, or any other defined period. HRAs are flexible in design so that employers can offer an HRA that best complements their overall employee benefit goals. Remember, the Clarity HRA is built to be flexible!


Can I, as an employer, choose proration for new hires and family status changes?

You sure can! You can prorate contributions for new hires and family status changes that occur anytime throughout the year. 


Can an employee covered by a spouse’s plan still participate in your group’s HRA? 

Yes, they can. However, there can be no “double-dipping” or reimbursement from both plans for the same expense. This is explained in Revenue Ruling 2002-03 and 2002-80. The spouse of an employee may also be covered by your group’s HRA if they wish as part of family coverage.


Are high-deductible health plans required in order to offer an HRA? 

Nope! The HRA can be paired with any health plan. They’re totally flexible and have no limitations.


Can the HRA allocation be set up on a 4-tier structure?

Yes, it can! The customization of an HRA allows you to set up the HRA allocation for employee, employee+spouse, employee+child(ren), or family.


Can I, as an employer, define the HRA rollover amount?

Yep! You choose exactly how your “fund rollover” will be structured. It’s then outlined in the Summary Plan Documents shared with employees.

Here’s how HRA fund rollover typically works: 

At the end of the plan year, participants will have a certain amount of time (“run-out period”) to submit claims for services incurred during the prior year. At the end of the run-out period or a different date set by you, all or a portion of the participant’s remaining funds may rollover to the next plan year or to a carryover account. If you choose, you may set the following rules: 

  1. A percentage of remaining funds may roll over. For example, if you choose a 50% rollover and an account has a $512 balance on the fund rollover date, you can roll over $256.
  2. A maximum amount may roll over, such as $250. Taking the example above, only $250 would rollover of the remaining $512.
  3. A percentage up to a maximum, such as 50% up to  $250. Again, $250 would roll over, using the example above. If you had $300 remaining, then only $150 would roll over (50% of $300). 
  4. All remaining funds may roll over to the next plan year. In this case, all $512 would roll over.

What is a health savings account? 

A health savings account (HSA) offers your employees a tax-advantaged way to save and pay for qualified out-of-pocket healthcare expenses. The employee must be covered by a high-deductible health plan to be able to take advantage of an HSA. Plus, HSAs like Clarity’s also offer opportunities for long-term saving and investing.


What is a high-deductible health plan? 

A high-deductible health plan is health insurance with deductible amounts that are greater than standard insurance plans. The monthly premiums for this type of health insurance are typically less expensive because employees agree to take on more of the upfront cost of medical care.


Is this really less expensive for the business? 

Yes, it is! High-deductible health plan premiums are much lower than the typical HMO and PPO premiums. Many businesses are finding these health plans more affordable for their companies and their employees. This helps employers save money while offering more options to employees who are increasingly demanding evolved benefit offerings.


What’s different about a Clarity HSA?

Simply put, you’re in control! Built for unpredictability, the Clarity HSA offers on-demand, interest-free payroll advances to cover unexpected healthcare costs. That way, employees aren’t just covered - they’re confident they can keep expenses under control. Employees can also take advantage of multiple national banking partners and dozens of investment options to keep their HSA savings safe and growing. Through Clarity’s secure portal, we provide employees with an up-to-date list of the mutual funds offered as well as recent performance information for those funds.


Do employees get a tax benefit from an HSA? 

They sure do! Employee contributions can be made to an HSA on either a pre-tax or post-tax basis. When employees make pre-tax contributions, it is done through a Section 125 plan (also called a salary reduction or cafeteria plan), generally through direct deposit of payroll. If employees contribute funds on a post-tax basis, the amount can be deducted from their taxable income. Either way, it’s a win-win!


Does an employer have to make contributions to an employee’s HSA?

Nope, it’s not required. Employers are under no obligation to make any contributions to their employees’ HSAs. Many employers do find that making a contribution to employees’ HSA accounts may help improve the adoption of HDHPs and HSAs, especially if they are transitioning from a more traditional type of health coverage. Contributing to employees’ HSAs is also a great incentive to attract top talent in your field.


May an employer fully fund the employee’s HSA at the beginning of the year? 

Yes, you can. An employer may fully fund the employee’s HSA at the beginning of the year. However, HSAs belong to the individual, not the employer. So the employer has no further control over the accounts after they have been funded. As a result, many employers elect to fund employees’ HSAs periodically throughout the year. This allows you to have more control over how much you contribute to each employee.


Are an employer’s contributions to an HSA treated as deductible healthcare expenses? 

That depends. The tax treatment of employer HSA contributions depends on how the business is incorporated. For sole proprietors, partnerships, and S-corporations, contributions to a partner’s HSA will be treated as a distribution to the partner and included in the partner’s income. It may also be deductible by the partner but not by the business (see IRS Notice 2005-8 for treatment of HSA contributions in exchange for guaranteed payments of services rendered for partners and two-percent shareholder-employees of S-corporations). For larger corporations, employer contributions are treated as employer-provided coverage for medical expenses under an accident or health plan.


Can employers make pre-tax contributions to their employees’ HSAs? 

Yep! Employers may make pre-tax contributions to their employee’s HSAs if they have a cafeteria plan in place that provides for HSA contributions. These contributions are not subject to withholding from wages for income tax or subject to FICA, FUTA, or the Railroad Retirement Act. A win-win for you and your employees!


Can employers make matching contributions? 

Yes and no. In general, employer matching contributions would likely violate comparability testing (i.e. they must make comparable contributions for all eligible individuals with comparable coverage during the same period). However, matching contributions through a section 125 cafeteria plan is not subject to comparability testing, but section 125 nondiscrimination rules would apply. 


Can I offer both an HSA with an FSA combination to employees? 

Yes, you can, but only with a limited-purpose FSA so as not to duplicate the coverage provided by the HSA. The limited-purpose FSA is designed to complement the HSA and may be established to pay for eligible vision and dental expenses. The FSA is not permitted to cover medical expenses because the tax-favored HSA is used to fund these costs first.


Is the employer responsible for reviewing medical expenses? 

Not at all. As an employer, you won’t be responsible for substantiating the employee’s HSA expenses. The individual account holder is responsible for determining that their account funds are being properly used and would be required to provide supporting evidence on the use of their funds if requested under IRS audit.


How often can an employee adjust their HSA contribution when contributing through a cafeteria plan? 

Virtually any time! Employees contributing to an HSA through a cafeteria plan may make adjustments to their contributions at any time as long as the change only affects future contributions.


As an employer, am I responsible for my employees’ HSA? 

Nope. You do not own your employees’ HSAs, nor are you responsible for how the funds are managed by the employee. The employee fully owns the contributions to the account as soon as they are deposited, just as with a personal checking or savings account to which you would deposit their compensation. It’s up to each employee to be responsible for how they use their HSA funds.


Do I have to contribute the same amount to every employee’s HSA? 

Generally, yes. Employer contributions must be comparable, that is, they must be in the same dollar amount or percentage of the employee’s deductible for all employees in the same “class”. However, with the passage of a new law in 2007, higher contributions are allowed for non-highly compensated employees. In addition, you can vary the level of contributions for full-time vs. part-time employees and employees with self-only coverage vs. family coverage. Keep in mind you do not need to consider employees who have not elected the high deductible health plan coverage because they are not eligible for HSA contributions.


How are contributions treated for owners, shareholders, or partners? 

Owners and officers with greater than a two-percent share of a Subchapter S corporation or partners in a partnership or LLC cannot make pre-tax contributions to their HSAs by salary reduction. Any contributions made to their HSAs by the company are taxable as income. However, they can make their own personal contributions to their HSAs and claim the contributed amount as a deduction on their personal income taxes. 


What is an FSA? 

I’m glad you asked! A healthcare flexible spending account (FSA) is an employer-sponsored benefit that allows you to set aside pre-tax dollars into an account to be used for eligible medical expenses. And as the name suggests, it’s incredibly flexible and customizable to your individual needs!


Why should you participate in an FSA? 

Do you like saving money? Contributions to the FSA are deducted from your paychecks on a pre-tax basis, significantly reducing your taxable income. This means you can increase your spendable income by an average of 30% of your annual contribution with tax savings!


How do you contribute money to your FSA? 

Each year, you can choose an annual deduction amount within that year’s contribution limit. That election will be divided by the number of pay periods in your plan year. Then, that amount will be deducted from your paycheck before taxes are assessed.


How much can you contribute to your FSA? 

Contribution limits change from year to year based on IRS guidelines. Please visit www.claritybenefitsolutions.com to see this year’s most updated contribution details.


Who is eligible under an FSA? 

You guessed it… it’s flexible! An FSA covers eligible expenses for yourself and your dependents, even if they are not covered under your primary health plan!


What expenses are eligible for reimbursement? 

Did I mention flexibility? FSA funds can be used for health plan co-pays, deductibles, co-insurance, eyeglasses, dental care, medications, and even certain medical supplies. The IRS provides specific guidance regarding eligible expenses. (See IRS Publication 502). You can also explore the FSA Store for a full list of eligible items.


How do you determine the date your expenses were incurred? 

Expenses are incurred at the time the medical care was provided, not when you are invoiced or pay the bill. So the date you need when submitting a claim is likely the day you had your appointment.


How do you get the funds out of your FSA? 

There are a few easy and convenient ways! If you have a Clarity Benefit Card, you can simply swipe it at the register when you receive the service or product. Otherwise, you can file a claim, including the receipt, documenting the type, amount and date. Once approved, your reimbursement check will be mailed or deposited directly into your bank account!


What happens if you don’t spend all of your FSA by the end of the plan year? 

Here’s where it might get tricky. Any unused funds at the end of the plan year are typically forfeited, which is known as the “use-it-or-lose-it rule”. To avoid losing any of your funds, be sure to only allocate dollars for medical expenses you are sure you can predict throughout the year.


How soon can you start spending your FSA funds? 

Right away! With a healthcare FSA, your entire annual election amount is available on the first day of the plan year, even though you have not yet contributed that amount.


Can you change your election amount mid-year?

Only under specific circumstances. Elections can only be altered if you experience a qualifying change in status as defined by IRS regulations, such as marriage, divorce, birth, or death in your immediate family.


What happens to the FSA if employment is terminated? 

Participation in your FSA is also terminated. This means that only expenses that were incurred prior to the termination date are eligible for reimbursement.


What is the deadline for submitting claims? 

It’s fairly flexible! You can submit claims for reimbursement at any time during the same plan year that you incur the expense. You may also have a grace period at the end of the plan year. Check the summary plan document provided by your employer for additional information.


Can you still deduct healthcare expenses from your tax return? 

Yep! However, you cannot deduct the same expenses for which you have already been reimbursed from your FSA.


Are over-the-counter (OTC) medications eligible for reimbursement? 

Yep! Most OTC medications are FSA-eligible. You can also explore the FSA Store for a full list of eligible items.


What is a Letter of Medical Necessity? 

Some FSA-eligible items may require a Letter of Medical Necessity (LMN) from a doctor detailing that the product is required for a certain individual’s health. The IRS mandates that eligible expenses be primarily for the diagnosis, treatment, or prevention of disease; this also includes treatment of conditions affecting any functional part of the body. For example, vitamins are not typically covered because they are used for general wellness, but a doctor may prescribe a vitamin to treat a medical condition. The vitamin would then become eligible in this instance.


What is Clarity SmartRide?

Clarity SmartRide is truly a win-win! It’s an employer-sponsored benefit program that allows you to set aside pre-tax (and in some cases, if your employer allows, post-tax) funds in separate accounts to pay for qualified expenses associated with your commute to work. This includes expenses for mass transit, private parking, and even popular rideshare platforms like UberPool and Lyft Line!


Why should I participate? 

Contributions to Clarity SmartRide are deducted from your paycheck on a pre-tax basis, which reduces your taxable income. You can save an average of 30% on your eligible transit and parking expenses–who doesn’t want to get paid on their way to work?!


What is a qualified mass transit expense? 

You can use SmartRide for qualified expenses like transit passes, tokens, fare cards, vouchers, or similar items entitling you to ride a mass transit vehicle to or from work. The mass transit vehicle can be publicly or privately operated and includes bus, rail, or ferry transportation. You also have the flexibility to start, stop or change elections monthly and any unused funds will carry over from month to month!


What Is Personal Wallet?

Personal Wallet is an employee’s best friend! It simplifies the employee Non-HSA Benefit Account reimbursement process by allowing their reimbursed funds to be credited to a special account linked to their Clarity Benefit Card. When employees select the Personal Wallet option, they’ll get faster, more convenient access to their money. That means no more waiting for a physical check to arrive in the mail or for the bank to process a direct deposit to their personal account.


How Does It Work?

The process it very easy! An employee simply selects Personal Wallet as their reimbursement method when submitting a request for reimbursement. As soon as their reimbursement claim is approved, funds are deposited into their Personal Wallet account automatically! Your employee can then swipe their Clarity Benefit Card to spend their money however they choose.


Is There Anything I Need To Enable This?

Nope! Your employees can start taking advantage of this reimbursement feature right away! Just let them know they can choose Personal Wallet as their default reimbursement method or simply select it each time they submit a reimbursement request.


Where Can Employees Use Their Personal Wallet Funds?

Virtually anyway, for anything! Your employees can swipe their Clarity Benefit Card to spend their money however they choose, even at the gas pump! Purchases made with their Personal Wallet funds are separate from the restricted funds in their employee benefit account(s), and not limited by type of merchant or type of expense.

There are two merchants, however, Walmart and CVS, that don’t support using Personal Wallet funds, or any type of carded reimbursement funds, for general purchases. Your employees can, however, use their card to pay for eligible expenses with their benefit account dollars at these locations.


Do I Need To Notify My Employees?

It’s not required, but you totally should! We encourage you to notify your employees that this reimbursement method is available to them. For your convenience, we have provided an overview document and FAQ to help you communicate this new feature to your employees.


What If My Employees Don’t Have A Clarity Benefit Card?

No worries! If your employees do not have a Clarity Benefit Card, they can still elect to use the Personal Wallet reimbursement feature. The reimbursement claim approval will trigger a benefit card to be issued and mailed to the employee. They can still benefit from the security, speed and convenience that comes with using a debit card for their reimbursement funds.


Can This Be Used With HSAs?

Unfortunately, no. This feature is only available for non-HSA benefit accounts.


How Can Employees Manage Their Personal Wallet Account?

Employees can easily manage their account on our online portal or through the Clarity mobile app the same way they access their other benefit information. Employees can check their balance, see when funds were deposited and even transfer funds out of their Personal Wallet account into a personal account!


Do Employees Still Have A Choice Over Which Reimbursement Method They Prefer When Submitting A Reimbursement Request?

They sure do! Employees can select other available reimbursement methods if they prefer to have reimbursement funds directed to their personal account. They can also choose to transfer money out of their Personal Wallet account into a personal banking account at any time.


If An Employee Swipes Their Card How Does The Account Determine Where To Pull The Funds From?

The process is fully automated! For employee benefit-eligible expenses, the card is configured to use benefit account dollars first until that account balance reaches zero. Once the balance reaches zero, funds will be pulled from the Personal Wallet account to cover the overage. For general/non-eligible items, the card will automatically pull funds from the Personal Wallet account, taking all the guesswork out for you and your employees!


What Happens To Personal Wallet Funds If An Employee Is Terminated?

Since Personal Wallet funds are for the employee to use as they wish, if an employee is terminated, we’ll mail them a paper check for their remaining account balance.


Can Employees Use Their Benefit Card At An Atm?

Nope. Because transactions need to meet the qualifications of the account, employees cannot use their Clarity Benefit Card to make ATM cash withdrawals.


WHAT IS COBRA?

COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, a federal law in the United States that allows eligible employees and their dependents to continue receiving health insurance coverage when they would otherwise lose it due to certain qualifying events.


WHAT IS A QUALIFYING EVENT?

A COBRA qualifying event refers to a specific triggering event that makes an individual eligible for COBRA continuation coverage. 

Qualifying events that may make an individual eligible for COBRA continuation coverage include:

  1. Termination of employment: When an employee's employment is terminated for reasons other than gross misconduct.
  2. Reduction in work hours: If an employee's work hours are reduced, leading to a loss of eligibility for the employer's health insurance plan.
  3. Divorce or legal separation: When a covered employee becomes divorced or legally separated from the spouse who was covered under the employer's health insurance plan.
  4. Death of the covered employee: If the covered employee passes away, their dependents may be eligible for COBRA continuation coverage.
  5. Medicare entitlement: When the covered employee becomes entitled to Medicare benefits, their dependents may be eligible for COBRA continuation coverage.
  6. Loss of dependent status: If a dependent child no longer qualifies as a dependent under the terms of the employer's health insurance plan.

HOW LONG DO I HAVE TO BE COVERED UNDER THE COMPANY INSURANCE BEFORE I (OR MY COVERED DEPENDENTS) ARE ELIGIBLE FOR COBRA?

To be eligible for COBRA continuation coverage, you generally need to have been covered under your company's group health insurance plan on the day before a qualifying event occurs. However, there is no specific minimum duration of coverage required before becoming eligible for COBRA. If you were enrolled in your employer's group health insurance plan at the time of the qualifying event, you and your covered dependents may be eligible for COBRA.


HOW LONG CAN I CONTINUE COVERAGE?

Under normal circumstances, COBRA continuation coverage can generally last for a maximum period of 18 months. However, the qualifying events listed above can extend the duration of COBRA coverage for both the qualified beneficiary and their dependents. 


WHAT IF I AM DISABLED?

If you become disabled while on COBRA continuation coverage, it may have an impact on the duration of your COBRA coverage. Under certain circumstances, the maximum period of COBRA coverage can be extended beyond the standard 18-month period.

If a qualified beneficiary (such as yourself) becomes disabled within the first 60 days of COBRA coverage, the coverage period can be extended to a maximum of 29 months. This extension is available if the Social Security Administration determines that the qualified beneficiary meets the definition of disability under the Social Security Act.

To qualify for this disability extension, the following criteria generally apply:

  1. The disability must occur within the first 60 days of COBRA coverage.
  2. The disability must be recognized and approved by the Social Security Administration.
  3. The qualified beneficiary must notify the plan administrator of the disability determination within 60 days of receiving it or before the end of the standard 18-month COBRA coverage period (whichever is later).

IS MY DOMESTIC PARTNER COVERED?

The coverage of a domestic partner under COBRA depends on the specific provisions of the employer's health insurance plan and whether domestic partners are recognized as eligible dependents for coverage.

COBRA generally allows for the continuation of health insurance coverage for qualified beneficiaries who were covered under the employer's group health plan before a qualifying event occurred. Qualified beneficiaries typically include the covered employee, their spouse, and their dependent children.


HOW DO I ELECT COBRA?

Once you receive your Specific Rights notice, you have 60 days to elect COBRA coverage. To elect coverage, you simply need to login to the Clarity Portal, select the COBRA tile and follow the instructions.


IF I DIDN’T NEED OR USE MY INSURANCE DURING THE ELECTION PERIOD, WHY DO I HAVE TO PAY ALL OF THE BACK PREMIUMS?

COBRA is a federal law providing certain rights to continue your Health, Dental, Vision, Health Flexible Spending Account, and certain EAPs. It also imposes certain responsibilities. Paying all premiums due from the loss of coverage.


WHEN ARE PREMIUMS DUE?

Your first premium is due 45 days from your COBRA election. Subsequent premiums are due the 1st of each month but must be postmarked no later than the 30th. The insurance carrier has the right to suspend your coverage between the 1st and 30th, reinstating benefits when premiums are received.


CAN I MAKE CHANGES TO MY COVERAGE(S)?

No, you generally cannot make changes to your COBRA coverage itself. COBRA continuation coverage is designed to provide you with the same health insurance coverage that you had while you were an active employee. It is intended to be a continuation of your previous coverage, not a new enrollment opportunity.

However, there are certain circumstances where you may have the ability to make changes to your coverage. These situations typically occur during open enrollment periods or if you experience a qualifying event that would allow you to change your coverage options. 


CAN MY EMPLOYER CHANGE MY INSURANCE CARRIER?

Yes, it is possible for your employer to change the insurance carrier while you are on COBRA continuation coverage. COBRA allows for the continuation of the same health insurance coverage that you had while you were an active employee. However, the employer has the ability to make changes to the insurance carrier or the specific plan offered to active employees.

If your employer decides to change the insurance carrier, they must provide you with a comparable health insurance plan offered by the new carrier. The new plan should provide similar coverage and benefits as the previous plan. The premium cost and other terms of the coverage should also be similar to what was available before the change.


ARE HEALTH FLEXIBLE SPENDING ACCOUNTS SUBJECT TO COBRA?

Health Flexible Spending Accounts (FSAs) are generally not subject to COBRA continuation coverage requirements. COBRA primarily applies to group health plans provided by employers that offer health insurance coverage. Health FSAs, on the other hand, are typically considered voluntary benefits that allow employees to set aside pre-tax dollars to pay for eligible medical expenses.


KEY TIMEFRAMES 

  1. Your employer notifies Clarity Benefit Solutions that your coverage has been terminated within 30 days of the loss of coverage. 
  2. Within 14 days, Clarity will send you a Specific Rights Notice by email and Mail.
  3. You will have 60 days to make your COBRA election. 
  4. Your first payment, including amounts due to-date, must be made within 45 days of the COBRA election. 
  5. Once Clarity receives your COBRA election, Insurance Carrier forms (if applicable) and payment, the coverages elected will be reinstated back to the loss of coverage. 
  6. Future payments are due on the 1st of the month and must be post-marked by the 30th of the month. Late payments will result in the termination of COBRA Benefits. 

What is an HRA? 

Health reimbursement arrangements (HRAs) are tax-advantaged accounts that are funded with employer dollars to pay employee expenses not covered by their health plan. The employer outlines which expenses will be covered in the HRA summary plan document within the limitations outlined by the Internal Revenue Service Publication 969. For example, an HRA could pay all eligible medical expenses, including premiums for health and long-term care insurance, or the HRA could be limited to cover only dental or vision expenses. Although an  HRA can have the option to carry forward unused funds to the future or for retirement, an employee cannot take their HRA funds to a new employer.


What are the benefits of offering an HRA to your employees? 

HRAs benefit much more than just your employees. Offering an HRA helps to lower your health plan expenses by providing your employees with a lower premium plan. This type of plan also offers a multitude of plan design options, allowing you to control the total cost of offering the account. Since HRAs are not pre-funded and are instead a promise-to-pay arrangement, you only pay when an employee files a claim. Plus, given that HRAs provide financial assistance to cover your employees’ eligible out-of-pocket healthcare expenses, you’ll experience better employee morale knowing their employer has them covered.


What makes the Clarity HRA different?

I’m so glad you asked! The Clarity HRA is built to be incredibly flexible. That means you can customize the dollar amount and payment schedule for each individual plan. We’ll work closely with you to determine the plan design that works best for your business and your employees (such as split copay HRAs.) Then throughout the plan year, we’ll provide online tools to monitor the effectiveness of the program. It’s truly a one-of-a-kind HRA experience!


Can my organization offer an HRA alone without a health plan?

Unfortunately, no. It was once a benefits trend in the past to offer employees an HRA they could use to purchase conventional insurance in the individual, non-group market with pre-tax dollars. This approach is no longer possible under section 2711. Although further guidance has not been issued, stand-alone HRAs will not be considered to be integrated coverage that complies with the annual dollar limit required by the ACA.


What is the tax benefit for me as an employer?

Employees aren’t the only ones who benefit from an HRA! Employers can deduct the amount of their HRA contributions. Keep in mind, since the account is funded on a “notional” basis like a line of credit, you can take the deduction only when the amounts are actually paid out to your employees.


Is there a tax benefit for my employees? 

Of course! HRA funds are contributed to employees on a pre-tax basis. That means disbursements are not included when calculating taxable income! For this reason, however, employees can not claim an income tax deduction for an expense that has been reimbursed under the HRA.


What happens to the funds if my employee leaves the company? 

HRA funds are not portable. With the HRA, since you have pledged to pay the funds to your employees on an if-needed basis, any unused funds remain with you, the employer.


How much can I contribute to an employee’s HRA? 

Contribution limits change from year to year based on IRS guidelines. Please visit www.claritybenefitsolutions.com to see this year’s most updated contribution details.


Do HRA contributions have to be made in equal amounts each month?

Not necessarily. An HRA is flexibly designed to make the HRA funds available to eligible employees on Day 1 or in installments throughout the year. No matter what you decide is best for your employees, you always hold the money until qualified expenses are incurred and then reimbursed.


Can employees contribute to an HRA? 

Nope! HRAs are employer-sponsored benefits so only employers may contribute funds. If you would like to give your employees additional opportunities to save for medical expenses (tax-free) consider supplementing an HRA with a Flexible Spending Account (FSA).


As an employer, do I have to contribute the same amount to every employee’s HRA? 

Yes, according to Federal regulations, employer contributions must be comparable for all employees. That means that contributions must be in the same dollar amount for all employees with the same category of coverage. But, you can vary the level of contributions for full-time vs. part-time employees. There may be other variations around comparability, so it’s best to consult your broker, consultant or tax advisor for additional information.


Can owners or partners participate in an HRA? 

Nope. According to IRS guidelines, anyone with two percent or more ownership in a schedule S corporation, LLC, LLP, PC, sole proprietorship, or partnership may not participate in their own HRA. However, C-corporation owners and their families ARE eligible to participate in HRA plans because they are considered to be W-2 common law employees. 


When does the HRA begin to pay for an employee’s expenses?

You decide! You can either allow the HRA to pay before the employee meets any deductible, or it can be set up so that the employee has to meet a certain amount of out-of-pocket expense before the HRA begins to pay. 


Is the HRA allocation based on a calendar year or a rolling plan year? 

Your choice! An HRA can be for a calendar year, plan year, or any other defined period. HRAs are flexible in design so that employers can offer an HRA that best complements their overall employee benefit goals. Remember, the Clarity HRA is built to be flexible!


Can I, as an employer, choose proration for new hires and family status changes?

You sure can! You can prorate contributions for new hires and family status changes that occur anytime throughout the year. 


Can an employee covered by a spouse’s plan still participate in your group’s HRA? 

Yes, they can. However, there can be no “double-dipping” or reimbursement from both plans for the same expense. This is explained in Revenue Ruling 2002-03 and 2002-80. The spouse of an employee may also be covered by your group’s HRA if they wish as part of family coverage.


Are high-deductible health plans required in order to offer an HRA? 

Nope! The HRA can be paired with any health plan. They’re totally flexible and have no limitations.


Can the HRA allocation be set up on a 4-tier structure?

Yes, it can! The customization of an HRA allows you to set up the HRA allocation for employee, employee+spouse, employee+child(ren), or family.


Can I, as an employer, define the HRA rollover amount?

Yep! You choose exactly how your “fund rollover” will be structured. It’s then outlined in the Summary Plan Documents shared with employees.

Here’s how HRA fund rollover typically works: 

At the end of the plan year, participants will have a certain amount of time (“run-out period”) to submit claims for services incurred during the prior year. At the end of the run-out period or a different date set by you, all or a portion of the participant’s remaining funds may rollover to the next plan year or to a carryover account. If you choose, you may set the following rules: 

  1. A percentage of remaining funds may roll over. For example, if you choose a 50% rollover and an account has a $512 balance on the fund rollover date, you can roll over $256.
  2. A maximum amount may roll over, such as $250. Taking the example above, only $250 would rollover of the remaining $512.
  3. A percentage up to a maximum, such as 50% up to  $250. Again, $250 would roll over, using the example above. If you had $300 remaining, then only $150 would roll over (50% of $300). 
  4. All remaining funds may roll over to the next plan year. In this case, all $512 would roll over.

 


What is a health savings account? 

A health savings account (HSA) offers your employees a tax-advantaged way to save and pay for qualified out-of-pocket healthcare expenses. The employee must be covered by a high-deductible health plan to be able to take advantage of an HSA. Plus, HSAs like Clarity’s also offer opportunities for long-term saving and investing.


What is a high-deductible health plan? 

A high-deductible health plan is health insurance with deductible amounts that are greater than standard insurance plans. The monthly premiums for this type of health insurance are typically less expensive because employees agree to take on more of the upfront cost of medical care.


Is this really less expensive for the business? 

Yes, it is! High-deductible health plan premiums are much lower than the typical HMO and PPO premiums. Many businesses are finding these health plans more affordable for their companies and their employees. This helps employers save money while offering more options to employees who are increasingly demanding evolved benefit offerings.


What’s different about a Clarity HSA?

Simply put, you’re in control! Built for unpredictability, the Clarity HSA offers on-demand, interest-free payroll advances to cover unexpected healthcare costs. That way, employees aren’t just covered - they’re confident they can keep expenses under control. Employees can also take advantage of multiple national banking partners and dozens of investment options to keep their HSA savings safe and growing. Through Clarity’s secure portal, we provide employees with an up-to-date list of the mutual funds offered as well as recent performance information for those funds.


Do employees get a tax benefit from an HSA? 

They sure do! Employee contributions can be made to an HSA on either a pre-tax or post-tax basis. When employees make pre-tax contributions, it is done through a Section 125 plan (also called a salary reduction or cafeteria plan), generally through direct deposit of payroll. If employees contribute funds on a post-tax basis, the amount can be deducted from their taxable income. Either way, it’s a win-win!


Does an employer have to make contributions to an employee’s HSA?

Nope, it’s not required. Employers are under no obligation to make any contributions to their employees’ HSAs. Many employers do find that making a contribution to employees’ HSA accounts may help improve the adoption of HDHPs and HSAs, especially if they are transitioning from a more traditional type of health coverage. Contributing to employees’ HSAs is also a great incentive to attract top talent in your field.


May an employer fully fund the employee’s HSA at the beginning of the year? 

Yes, you can. An employer may fully fund the employee’s HSA at the beginning of the year. However, HSAs belong to the individual, not the employer. So the employer has no further control over the accounts after they have been funded. As a result, many employers elect to fund employees’ HSAs periodically throughout the year. This allows you to have more control over how much you contribute to each employee.


Are an employer’s contributions to an HSA treated as deductible healthcare expenses? 

That depends. The tax treatment of employer HSA contributions depends on how the business is incorporated. For sole proprietors, partnerships, and S-corporations, contributions to a partner’s HSA will be treated as a distribution to the partner and included in the partner’s income. It may also be deductible by the partner but not by the business (see IRS Notice 2005-8 for treatment of HSA contributions in exchange for guaranteed payments of services rendered for partners and two-percent shareholder-employees of S-corporations). For larger corporations, employer contributions are treated as employer-provided coverage for medical expenses under an accident or health plan.


Can employers make pre-tax contributions to their employees’ HSAs? 

Yep! Employers may make pre-tax contributions to their employee’s HSAs if they have a cafeteria plan in place that provides for HSA contributions. These contributions are not subject to withholding from wages for income tax or subject to FICA, FUTA, or the Railroad Retirement Act. A win-win for you and your employees!


Can employers make matching contributions? 

Yes and no. In general, employer matching contributions would likely violate comparability testing (i.e. they must make comparable contributions for all eligible individuals with comparable coverage during the same period). However, matching contributions through a section 125 cafeteria plan is not subject to comparability testing, but section 125 nondiscrimination rules would apply. 


Can I offer both an HSA with an FSA combination to employees? 

Yes, you can, but only with a limited-purpose FSA so as not to duplicate the coverage provided by the HSA. The limited-purpose FSA is designed to complement the HSA and may be established to pay for eligible vision and dental expenses. The FSA is not permitted to cover medical expenses because the tax-favored HSA is used to fund these costs first.


Is the employer responsible for reviewing medical expenses? 

Not at all. As an employer, you won’t be responsible for substantiating the employee’s HSA expenses. The individual account holder is responsible for determining that their account funds are being properly used and would be required to provide supporting evidence on the use of their funds if requested under IRS audit.


How often can an employee adjust their HSA contribution when contributing through a cafeteria plan? 

Virtually any time! Employees contributing to an HSA through a cafeteria plan may make adjustments to their contributions at any time as long as the change only affects future contributions.


As an employer, am I responsible for my employees’ HSA? 

Nope. You do not own your employees’ HSAs, nor are you responsible for how the funds are managed by the employee. The employee fully owns the contributions to the account as soon as they are deposited, just as with a personal checking or savings account to which you would deposit their compensation. It’s up to each employee to be responsible for how they use their HSA funds.


Do I have to contribute the same amount to every employee’s HSA? 

Generally, yes. Employer contributions must be comparable, that is, they must be in the same dollar amount or percentage of the employee’s deductible for all employees in the same “class”. However, with the passage of a new law in 2007, higher contributions are allowed for non-highly compensated employees. In addition, you can vary the level of contributions for full-time vs. part-time employees and employees with self-only coverage vs. family coverage. Keep in mind you do not need to consider employees who have not elected the high deductible health plan coverage because they are not eligible for HSA contributions.


How are contributions treated for owners, shareholders, or partners? 

Owners and officers with greater than a two-percent share of a Subchapter S corporation or partners in a partnership or LLC cannot make pre-tax contributions to their HSAs by salary reduction. Any contributions made to their HSAs by the company are taxable as income. However, they can make their own personal contributions to their HSAs and claim the contributed amount as a deduction on their personal income taxes. 


What is an FSA? 

I’m glad you asked! A healthcare flexible spending account (FSA) is an employer-sponsored benefit that allows your employees to set aside pre-tax dollars into an account to be used for eligible medical expenses. And as the name suggests, it’s incredibly flexible and customizable for each employee!


Why should your employees participate in an FSA? 

Do your employees like saving money? Contributions to the FSA are deducted from your employees’ paychecks on a pre-tax basis, significantly reducing their taxable income. This means your employees can increase their spendable income by an average of 30% of their annual contribution with tax savings!


How do your employees contribute money to their FSA? 

Each year, employees will choose an annual deduction amount within that year’s contribution limit. That election will be divided by the number of pay periods in their plan year. Then, that amount will be deducted from the employee’s paycheck before taxes are assessed.


How much can your employees contribute to their FSA? 

Contribution limits change from year to year based on IRS guidelines. Please visit www.claritybenefitsolutions.com to see this year’s most updated contribution details.


Who is eligible under an FSA? 

You guessed it… it’s flexible! An FSA covers eligible expenses for your employees and their dependents, even if they are not covered under the employee’s primary health plan!


What expenses are eligible for reimbursement? 

Did I mention flexibility? FSA funds can be used for health plan co-pays, deductibles, co-insurance, eyeglasses, dental care, medications and even certain medical supplies. The IRS provides specific guidance regarding eligible expenses. (See IRS Publication 502). You can also explore the FSA Store for a full list of eligible items.


How do your employees determine the date their expenses were incurred?

Expenses are incurred at the time the medical care was provided, not when your employees are invoiced or pay the bill. So remind them that the date they need when submitting a claim is likely the day they had their appointment.


How do your employees get the funds out of their FSA? 

There are a few easy and convenient ways! If your employees have a Clarity Benefit Card, they can simply swipe it at the register when they receive the service or product. Otherwise, your employees can file a claim, including the receipt, documenting the type, amount and date. Once approved, their reimbursement check will be mailed or deposited directly into their bank account!


What happens if your employees don’t spend all of their FSA by the end of the plan year? 

Here’s where it might get tricky. Any unused funds at the end of the plan year are typically forfeited, which is known as the “use-it-or-lose-it rule”. To help employees avoid losing any of their funds, be sure to recommend that employees only allocate dollars for medical expenses they are sure they can predict throughout the year.


How soon can employees start spending their FSA funds? 

Right away! With a healthcare FSA, your employees' entire annual election amount is available on the first day of the plan year, even though they have not yet contributed that amount.


Can employees change their election amount mid-year? 

Only under specific circumstances. Elections can only be altered if employees experience a qualifying change in status as defined by IRS regulations, such as marriage, divorce, birth, or death in their immediate family.


What happens to the FSA if employment is terminated? 

Participation in their FSA is also terminated. This means that only expenses that were incurred prior to their termination date are eligible for reimbursement.


What is the deadline for submitting claims?

It’s fairly flexible! Your employees can submit claims for reimbursement at any time during the same plan year that they incur the expense. They may also have a grace period at the end of the plan year. Check the summary plan document you provided them for additional information.


Can employees still deduct healthcare expenses on their tax returns? 

Yep! However, they cannot deduct the same expenses for which they have already been reimbursed from their FSA.


Are over-the-counter (OTC) medications eligible for reimbursement? 

Yep! Most OTC medications are FSA-eligible. You can also explore the FSA Store for a full list of eligible items.


What is a Letter of Medical Necessity? 

Some FSA-eligible items may require a Letter of Medical Necessity (LMN) from a doctor detailing that the product is required for a certain individual’s health. The IRS mandates that eligible expenses be primarily for the diagnosis, treatment, or prevention of disease; this also includes treatment of conditions affecting any functional part of the body. For example, vitamins are not typically covered because they are used for general wellness, but a doctor may prescribe a vitamin to treat a medical condition. The vitamin would then become eligible in this instance.


What is Clarity SmartRide?

Clarity SmartRide is truly a win-win! It’s an employer-sponsored benefit program that allows you to set aside pre-tax (and in some cases, if your employer allows, post-tax) funds in separate accounts to pay for qualified expenses associated with your commute to work. This includes expenses for mass transit, private parking, and even popular rideshare platforms like UberPool and Lyft Line!


Why should I participate? 

Contributions to Clarity SmartRide are deducted from your paycheck on a pre-tax basis, which reduces your taxable income. You can save an average of 30% on your eligible transit and parking expenses–who doesn’t want to get paid on their way to work?!


What is a qualified mass transit expense? 

You can use SmartRide for qualified expenses like transit passes, tokens, fare cards, vouchers, or similar items entitling you to ride a mass transit vehicle to or from work. The mass transit vehicle can be publicly or privately operated and includes bus, rail, or ferry transportation. You also have the flexibility to start, stop or change elections monthly and any unused funds will carry over from month to month!


What Is Personal Wallet?

Personal Wallet is an employee’s best friend! It simplifies the employee Non-HSA Benefit Account reimbursement process by allowing their reimbursed funds to be credited to a special account linked to their Clarity Benefit Card. When employees select the Personal Wallet option, they’ll get faster, more convenient access to their money. That means no more waiting for a physical check to arrive in the mail or for the bank to process a direct deposit to their personal account.


How Does It Work?

The process it very easy! An employee simply selects Personal Wallet as their reimbursement method when submitting a request for reimbursement. As soon as their reimbursement claim is approved, funds are deposited into their Personal Wallet account automatically! Your employee can then swipe their Clarity Benefit Card to spend their money however they choose.


Is There Anything I Need To Enable This?

Nope! Your employees can start taking advantage of this reimbursement feature right away! Just let them know they can choose Personal Wallet as their default reimbursement method or simply select it each time they submit a reimbursement request.


Where Can Employees Use Their Personal Wallet Funds?

Virtually anyway, for anything! Your employees can swipe their Clarity Benefit Card to spend their money however they choose, even at the gas pump! Purchases made with their Personal Wallet funds are separate from the restricted funds in their employee benefit account(s), and not limited by type of merchant or type of expense.

There are two merchants, however, Walmart and CVS, that don’t support using Personal Wallet funds, or any type of carded reimbursement funds, for general purchases. Your employees can, however, use their card to pay for eligible expenses with their benefit account dollars at these locations.


Do I Need To Notify My Employees?

It’s not required, but you totally should! We encourage you to notify your employees that this reimbursement method is available to them. For your convenience, we have provided an overview document and FAQ to help you communicate this new feature to your employees.


What If My Employees Don’t Have A Clarity Benefit Card?

No worries! If your employees do not have a Clarity Benefit Card, they can still elect to use the Personal Wallet reimbursement feature. The reimbursement claim approval will trigger a benefit card to be issued and mailed to the employee. They can still benefit from the security, speed and convenience that comes with using a debit card for their reimbursement funds.


Can This Be Used With HSAs?

Unfortunately, no. This feature is only available for non-HSA benefit accounts.


How Can Employees Manage Their Personal Wallet Account?

Employees can easily manage their account on our online portal or through the Clarity mobile app the same way they access their other benefit information. Employees can check their balance, see when funds were deposited and even transfer funds out of their Personal Wallet account into a personal account!


Do Employees Still Have A Choice Over Which Reimbursement Method They Prefer When Submitting A Reimbursement Request?

They sure do! Employees can select other available reimbursement methods if they prefer to have reimbursement funds directed to their personal account. They can also choose to transfer money out of their Personal Wallet account into a personal banking account at any time.


If An Employee Swipes Their Card How Does The Account Determine Where To Pull The Funds From?

The process is fully automated! For employee benefit-eligible expenses, the card is configured to use benefit account dollars first until that account balance reaches zero. Once the balance reaches zero, funds will be pulled from the Personal Wallet account to cover the overage. For general/non-eligible items, the card will automatically pull funds from the Personal Wallet account, taking all the guesswork out for you and your employees!


What Happens To Personal Wallet Funds If An Employee Is Terminated?

Since Personal Wallet funds are for the employee to use as they wish, if an employee is terminated, we’ll mail them a paper check for their remaining account balance.


Can Employees Use Their Benefit Card At An Atm?

Nope. Because transactions need to meet the qualifications of the account, employees cannot use their Clarity Benefit Card to make ATM cash withdrawals.