If you’re looking for a way to help your employees pay for the rising costs of healthcare, as well as contain the number of claims they file to contain your premium increases, consider offering a Standard Dental and Vision HRA. This type of account is a benefit to both employers and employees. It helps to keep employees healthier, since they have a tax-free way to pay for dental and vision costs, and employers enjoy a more productive workforce, lower claims numbers and subsequent premium increases.

In this post, we’ll do a deep dive into what a Standard Dental and Vision HRA is, how it works, what it covers, and why employers should offer it.

What is a Standard Dental and Vision HRA?

A Standard Dental and Vision HRA is an employer-sponsored, employer-funded account through which employees can reimburse for out-of-pocket dental and vision expenses. The employer owns the account and thus has control over how much it allocates to each HRA, at what cadence the account resets and what happens to any leftover allowance once the plan resets. There’s no annual federal limit on how much an employer can reimburse for dental and vision expenses through a Standard Dental and Vision HRA, so employers can choose the amount that makes sense for their budget. All reimbursements are tax-free to the employee and tax deductible for the employer.

Other account details that employers have control over are:

1. Whether or not they want to enable employees to reimburse for the complete list of out-of-pocket dental and vision expenses allowed by the IRS. Or if they want to further restrict that list.  

2. Whether or not the HRA participants have access to a debit card to pay for their dental and vision expenses directly, or if the employees will be required to pay for the expenses first and reimburse for them through the account.

While the employer has a lot of control over the details of how this type of benefit functions, there are some federally-imposed rules about Standard Dental and Vision HRAs work. 

1. In order to offer this type of account, employers must also offer a group dental and vision plan.

2. In order to participate in this benefit, employees must be enrolled in a group dental and vision insurance plan to participate. Employees can also reimburse for dental and vision expenses for their spouse and dependents if they are also covered by a group dental and vision insurance plan.

How does a Standard Dental and Vision HRA work?

Once an employer has decided they want to offer this benefit, they will need to work with their benefits broker and a benefits administrator to create the HRA plan. They will need to choose:

1. How much money each account receives.

2. How often that allowance resets (monthly, quarterly or annually).

3. How employees will access their allowance (directly via debit card or via reimbursement).

4. The types of expenses the employer wants to reimburse for.

5. Whether they will allow for a grace period or balance rollover for any unused allowance at the end of the plan term.

Employers will also want to make sure they offer a group dental and vision insurance plan during open enrollment to accompany their HRA. The employee must sign up for the group dental and vision insurance plan and then provide proof of this group coverage to the HRA administrator in order to participate in the benefit. Once the employee’s group insurance coverage has been verified, they can use their Standard Dental and Vision HRA to pay for approved out-of-pocket dental and vision expenses.

The employer should make sure to provide ongoing employee communication and education to their workforce about how they can best utilize their HRAs. The more employees engage with the benefit, the greater the positive impact it will have on their health and the company’s performance.

Why employers should offer a Standard Dental and Vision HRA

There are several challenges facing employers of all sizes that offering a Standard Dental and Vision HRA can help address.

1. Low adoption of the group dental and vision insurance plan.

This can be a problem for employers for several reasons. First, it means that many employees are likely forgoing the health care they need because they don’t have a way to pay for it. This can lead to worse problems down the road including: serious illness or injury, absenteeism and lost productivity. Second, smaller employers might have a hard time meeting the minimum participant threshold set by the insurance carrier.

A Standard Dental and Vision HRA can help encourage employees to sign up for the group dental and vision insurance plan since it’s the bonus they get for signing up for the group plan. They get dental and vision insurance coverage and an employer-funded account through which they can pay for their out-of-pocket dental and vision expenses. It will also encourage them to seek the treatment they need since they have a way to pay for it. This will lead to a healthier and more productive workforce.

2. High number of claims submitted against the insurance carrier, leading to higher and less affordable premiums.

The desire to contain health insurance costs is almost universal across employers. But employers that have a workforce that is submitting an unusually high number of claims against the insurance carrier might benefit from having another account through which employees can pay for their needed dental and vision expenses. The Standard Dental and Vision HRA can be used to pay for out-of-pocket expenses like laser eye surgery, eyeglasses, teeth cleanings and more so that employees submit fewer claims through their insurance. Fewer claims means that the insurance carrier is less likely to raise rates as much the following plan year. 

3. Supplement your Health Savings Account and enable HSA dollars to go further for your team.

By offering your team both an HSA and a Dental and Vision HRA, they can build their HSA account balance by using the HRA for their dental and vision expenses. Because HSA funds rollover year-to-year and never expire, spending less from the HSA means more money to potentially invest or save for the long term. 

4. Want to support employees in paying for health costs but can’t or don’t want to offer a Health Savings Account (HSA).

The Standard Dental and Vision HRA can be a good alternative to offering an HSA. It supports employees financially by giving them tax-free money to help pay for medical expenses but allows them to have any type of health insurance (since participating in an HSA requires the participant to also be enrolled in a High Deductible Health Plan or HDHP). Note: employees must be enrolled in a group dental and vision insurance plan to participate.

What does a Standard Dental and Vision HRA cover?

The IRS allows employers to reimburse for the following expenses through their Standard Dental and Vision HRA. These expenses are the dental and vision-related expenses listed under IRS Section 213(d). They are amounts paid for the diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting the structure of the body. Employers can choose to further restrict reimbursements from this list.

• Contact lenses

• Eyeglasses

• Prescriptions

• Dental exams

• Dental cleanings

• Laser eye surgery

• Eye Exam

• Eye Surgery

• Gum Treatment

• Braces

• Retainers

• Oral Surgery

• Meals (including hospital meals) while receiving treatment

• Transportation expenses for receiving medical care

• Prescriptions

• Lodging necessary to receive care

• Lab fees

How the Standard Dental and Vision HRA is compatible with other benefit accounts

If an employer wishes to offer a Standard Dental and Vision HRA alongside other flexible benefit accounts, there’s good news. These types of HRAs are compatible with all other flexible benefits. Here are some benefits bundles that might make sense for your company:

HDHP + HSA + Standard Dental and Vision HRA

By bundling the dental and vision HRA with an HDHP + HSA combination you can:

• Contain your health insurance spend. HDHPs have the lowest annual premiums of the traditional health plans and the HSA gives employees a tax-free way to save for out-of-pocket medical expenses. If you pair the Standard Dental and Vision HRA with the HDHP + HSA, employees can use their HRA for dental and vision expenses and save their HSA money for other health-related costs. This will help ensure they seek timely treatment and don’t allow medical issues to get worse (thus requiring more expensive treatment and higher insurance claims).

• Reduce the overall cost to employ workers. Employees’ contributions to their HSA are made before income taxes are assessed, lowering their net taxable income. This lowers the FICA tax responsibility of the employer. Any employer contributions to employees’ HSAs are also tax-deductible.

• Lead to a healthier workforce. Employees that have the money available to them to pay for their health-related expenses are more likely to be healthier than employees that don’t have that employer-sponsored support.

Healthcare FSA + Standard Dental and Vision HRA

By bundling a Flexible Spending Account (FSA) with the Standard Dental and Vision HRA you can:

• Improve the flexibility of your benefits package. The FSA can be paired with any kind of group health insurance as can the Standard Dental and Vision HRA. This gives employers latitude to choose the group insurance plan(s) that makes sense for them and their company while still offering benefit accounts that give employees a way to pay for out-of-pocket medical expenses. If employers are offering multiple insurance plans, employees have the freedom to choose the plan that makes sense for them while still taking advantage of the FSA and HRA.

• Lower the cost to employ workers. Employees’ FSA contributions are made prior to income taxes being assessed which lowers their net taxable income. This lowers employers’ FICA responsibility. Employer contributions to employees’ FSAs are tax-deductible as a business expense. 

• Lead to a healthier workforce. Just like with the HSA + HRA pairing, the FSA and HRA bundle gives employees a way to pay for the out-of-pocket medical expenses they might incur. This encourages employees to seek out the treatment they need early on, before conditions worsen and more expensive treatment is needed.

The Standard Dental and Vision HRA can provide a powerful boost to your benefits package by giving employees a way to pay for out-of-pocket dental and vision expenses. It can increase employee adoption of the group dental and vision plan, improve their overall health and productivity, and help employers contain costs. 

If you’re looking to level up your benefits package, reach out to Lively today. We offer a suite of flexible benefits that can be bundled or offered on a one-off basis so that you can craft the most potent benefits package for your workforce.