What is a defined contribution health plan?
Rather than paying a portion of the costs to provide a traditional group health benefit like group health insurance, employers can control their costs by establishing a defined contribution health plan.
Under ERISA, there are two types of retirement plans: defined benefits, where employers promise a specified monthly benefit at retirement, and a defined contribution plan, where the employer contributes to an employee's individual account at a set rate.
Much like the switch from pensions to 401(k)s, employers can do the same with health benefits! Instead of offering a group health plan, you can contribute a monthly allowance to your employees, such as with a health savings account or a health reimbursement arrangement. An HRA allows you to reimburse your employees tax-free for their qualifying medical expenses. With a QSEHRA or ICHRA, this includes individual health inurance premiums.
To learn more about HRAs, visit PeopleKeep.com.
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