EBHRAs for Businesses - Flexible and Cost-Effective Benefits

For small business owners, keeping talent engaged and satisfied is essential, but rising healthcare costs often present a challenge. EBHRAs provide a creative way to bridge this gap.

Here’s why they're worth considering:

1. Budget-Friendly for Employers

Small businesses often struggle to afford comprehensive health benefits. EBHRAs offer a low-cost alternative while still helping employees manage healthcare expenses. Since employers determine the reimbursement limits, this gives precise control over benefits-related spending.

2. Increased Flexibility

An EBHRA gives employees the freedom to choose what healthcare services fit their individual needs. This level of flexibility is particularly appealing in today's diverse workforce.

For example, some employees may use EBHRA funds for dental cleanings or new eyeglasses, while others may apply it toward copayments from recent medical procedures.

3. Keeps Costs Predictable

Unlike claim-based plans where costs may vary, EBHRAs provide predictable expenses because the contribution amounts are predefined by the employer.

4. Simplifies Administrative Work

Employers don’t need to manage complex insurance claims. EBHRA funds are pre-funded, and reimbursements are processed for eligible medical expenses, streamlining the operational workload.

How Do EBHRAs Work?

Understanding how EBHRAs function is key to successfully implementing them. Let's break it down step by step:

1. Employer Sets Contribution Limits

Employers determine the annual reimbursement amount per employee, up to the regulated maximum (e.g., $1,950 for the 2024 tax year).

2. Employees Pay and Claim

Employees pay for eligible health-related services or products upfront and submit claim documentation (e.g., receipts) to seek reimbursement.

3. Employer Reimburses Expenses

Employers process approved claims and reimburse employees directly, up to their annual limit.

4. Tax-Free Benefits

For both employers and employees, EBHRA reimbursements are tax-advantaged. For employers, contributions are tax deductible, while employees receive funds tax-free as long as they are used for IRS-approved medical expenses.

Key Benefits of EBHRAs for Employees

An EBHRA doesn’t just benefit employers; it’s also widely appreciated by employees. Here's why:

1. Covers Supplemental Costs

From orthodontic visits to fitness memberships, EBHRAs offer financial support for health-related expenses that comprehensive insurance plans might miss.

2. No Enrollment in a Group Plan Required

Employees don’t need to be enrolled in an employer's major group plan to qualify, making EBHRAs accessible to a broader workforce.

3. Encourages Health Awareness

By supporting services like vision or dental care, EBHRAs promote a proactive approach to health and wellness. Employees are more likely to seek preventive care when they know its costs are covered.

4. Adds Value Without Overcrowding with Options

Instead of overwhelming employees with too many complex benefits packages, an EBHRA provides targeted, meaningful support that is easy to understand and use.

Implementing an EBHRA in Your Company

Thinking about rolling out an EBHRA for your team? Here’s how to get started:

Step 1: Assess Your Budget

Determine how much you can comfortably set aside per employee within the IRS cap. Remember, contributions should align with your financial goals while remaining competitive in the job market.

Step 2: Define Eligible Costs

Although the IRS defines broad categories for eligible expenses, you can tailor reimbursements by communicating how EBHRA funds can be used. Specify guidelines clearly in benefit documentation.

Step 3: Partner with an HRA Administrator

Use a trusted HRA management provider to streamline claims processing, reduce administrative friction, and ensure compliance with IRS and DOL regulations.

Step 4: Communicate with Employees

Education is key! Host onboarding sessions or one-on-one meetings to help employees understand the details of the EBHRA, including how much they’ve been allocated and how to submit claims.

Step 5: Evaluate and Adjust

Monitor participation and feedback periodically. Are employees utilizing the benefit? Should you adjust contribution amounts based on usage or employee satisfaction?

EBHRAs vs. Other HRAs

While EBHRAs share similarities with other HRAs, they stand apart in some key areas:

For small businesses, this distinction clarifies that EBHRAs are ideal when supplemental support is needed, whereas QSEHRAs or ICHRAs cater to more comprehensive individual plans.

The Next Step Toward Empowering Your Team

EBHRAs don’t just offer flexibility for small businesses—they provide a practical, cost-effective solution for offering meaningful health benefits that employees will value.

At SD Mayer & Associates, we help businesses like yours implement innovative solutions including EBHRAs, navigating every step from compliance to communication. With a well-thought-out benefits strategy in place, you can foster team satisfaction, attract top talent, and reignite employee loyalty.

If you’re curious about making EBHRAs part of your benefits offering, reach out to us today. Together, we can customize a plan that drives lasting results and focuses on your company’s unique needs.