1. Putting the Pieces Together- HRA, HSA & FSA-Where Do They Fit? Presented by Rob Thurston, President, HR Consulting Group, Inc. March 13, 2006

2. Putting the Pieces Together PBasic Plan Designs PCase Study Review PPitfalls in Plan Design PWhere do we go from Here?

3. Who will be Covered? PFirst Question to ask: Who will be covered?  Health FSA & HRA B Any employee, can be employer defined PHSA Any Individual, not entitled to medicare or claimed as a tax dependent & is enrolled in a qualified HDHP

4. Is there a Qualified HDHP Plan?  Be careful B not just any plan will do  Amounts are indexed B make sure plans will be updated to meet annual requirements PShould the employer offer more than one option?

5. How can Employee Pay?  Health FSA B Employee can pay pre- tax through a S125 Cafeteria Plan  HRA B Employee does not pay into HRA portion, however employee can pre-tax the HDHP  HSA B Employee can pre-tax both the HDHP and the HSA contribution through a S125 Cafeteria Plan

6. What will Employer Pay?  Health FSA B should employer make a contribution?  HDHP B will employer increase contribution towards HDHP?  HRA B How much does employer want to put into the account?  HSA B Does employer want to make a contribution B warning, money will belong to employee!

7. How will Unused Amounts be Handled?  Health FSA B will employer allow 2 2 month extension to pay claims?  HRA B will employer allow employee to take money with them? Will there be a limit placed on the liability?  HSA B if employer money is deposited, will employer have problem over loss of control of funds?

8. What Type of Expenses will Be Eligible?  Health FSA B should be limited scope or full FSA or both?  HRA B should be limited scope?  HSA B employer has no control here PCoordination if all three are present

9. Company Culture PHow will plan design be viewed by employees? PWhat is normal communication process used? PWhat goals are being set by Corporation?

10. Case Study 1 PSmall Employer under 100 lives PDid not have HDHP that qualified for HSA PGoal was to minimize rate increases (2005 has 23% rate increase)

11. Case Study 1 PWent with PPO plan with $3,000/$5,500 Deductible and $5,000/$10,000 OOP PHad general purpose FSA and Dental Plan PWanted more control over money, did not want to contribute to HSA

12. Case Study 1 PLets Look at Single Coverage Design:  Health FSA B Employee can contribute up to $1800 B FSA pays first  HRA B Employer contributes $1200  HDHP B Expenses covered by Insurance  OOP B Employee exposure $2,000

13. Case Study 2 P1500 employees, multiple locations located nationwide PWent from self-funded PPO & HMO option to HDHP POffered 2 Self-funded HDHP designs: BHigh Option has $1000/$2000 Deductible and $3000/$6000 OOP Max BLow Option has $2000/$3000 Deductible and $5100/$10200 OOP Max

14. Case Study 2 POffered 2 FSA Plans, Limited Scope & Full FSA PHad S125 Plan including HDHP, FSA, Dental and Vision PAdded HSA in 2005 Plan Year

15. Case Study 2 PSlight Drop in FSA Participation P63% Elected to Participate in HSA with average monthly contribution of $75 PMajority elected High Option, even though premium was higher PClaims decreased by 43%

16. Case Study 2 PEmployer exceeded goal of reducing claim cost and minimizing premium increases PInstallation was not without problems: Employee view, HSA Trustee Issues & Increased workload for HR Staff PCorporate concerned that employees are not getting healthcare when needed

17. Case Study 2 PIn 2006, added a third option to plan that did not qualify for HSA ($500 Deductible) PPremium did not increase for 2006  Employees did not go to lower deductible plan B most stayed with what they had in 2005

18. Caution B Avoid These Potholes! PMid-Year Changes BHSA can be added mid-plan year, but this can be messy and some options are still being discussed by IRS (i.e. changing to a limited scope FSA, may not be valid) PNon-Discrimination BBefore making contributions to an HSA, an employer should be sure to review the comparability rules...if it is not part of a S125 Cafeteria Plan

19. Caution B Avoid These Potholes PCOBRA applies to HRA's BThis can increase liability in case of divorce as the full balance of the account must be available to both the employee and ex-spouse PERISA BMake sure that all plan documents, SPD's and employee communications are accurate--- watch for ERISA wording that can make a non- ERISA HSA and ERISA plan by inference

20. Questions? PFor more information, contact: PRob Thurston, HR Consulting Group, Inc. P(801) 765-4417 Phrconsultinggroup@msn.com