Zane Benefits Publishes New Information on the Defined Contribution Plan Design

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The six most popular defined contribution plan design options to customize the perfect health benefits.

Today, Zane Benefits, the number one online small business health benefits solution, published new information on the defined contribution plan design.

According to Zane Benefits’ website, a "pure" defined contribution health benefits strategy is a straight-forward concept: the Employer designs the plan and sets the healthcare allowance, employees purchase individual health insurance and/or incur eligible medical expenses, and then defined contribution software takes care of the rest. But at the same time, plan design options allow employers to control cost, and, at the same time, design a plan that attracts and retains key employees.

The use of a stand-alone HRA also allows for the employer and employees to receive the same tax-benefits as a traditional group health insurance plan.

The most popular defined contribution health plan design options:

Plan Design Option #1: Allowance & Frequency

When designing the defined contribution plan, employers set the amounts to allocate for each class of employee, and at what frequency will they be available (monthly, annually, etc.). There are no minimum or maximum allowance amounts.

Plan Design Option #2: Employee Classes & Eligibility

Employers can define different classes based on bona-fide job criteria such as job description, tenure with the company, geographic location, part-time or full-time status, etc. and then allocate a different allowance to each class. ERISA and HIPAA allow this, as long as all "similarly situated" employees are treated equally.

This plan design option, of being able to offer different amounts and benefits to different classes of employees, is attractive to employers with specific recruitment needs.

Plan Design Option #3: Annual Rollover of Unused Funds

When designing the defined contribution plan, employers decide what will happen to employees' unused defined contribution funds at the end of the plan year. The plan can be designed to allow maximum rollover of unused funds, a capped rollover of unused funds, or no rollover of unused funds.

Plan Design Option #4: Eligible Medical Expenses

The IRS determines the definition for medical expenses that can be reimbursed through an HRA, which again is the base of a "pure" defined contribution health plan. But within those expenses, an employer can further restrict expenses to be reimbursed.

Plan Design Option #5: Cost-Sharing Options

Employers can design the plan with a co-insurance and/or deductible. For example, with a defined contribution co-insurance the employer could reimburse 80% of all eligible medical expenses. With a defined contribution deductible, employees could be required to pay out-of-pocket a certain amount per plan year before the defined contribution allowance is available to them.

Plan Design Option #6: Expense-Specific Maximums

Within an employee's annual allowance, the employer can design the plan to limit the amount reimbursed for certain categories of health care expenses.

All of these defined contribution plan design options are specified in the HRA plan documents.

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About Zane Benefits
Zane Benefits was founded in 2006 to provide a revolutionized SaaS (Software-as-a-Service) administration platform ("ZaneHRA") for Health Reimbursement Arrangements (HRAs) and defined contribution health care. The flagship software provides a 100% paperless administration experience to small businesses and insurance professionals that want to offer better health benefits without a traditional group health insurance plan at lower costs. For more information about ZaneHRA, visit http://www.zanebenefits.com .

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Christina Merhar
Zane Benefits
800-391-9209 6725
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