Health Reimbursement Arrangements

1. Health Reimbursement Arrangements Accounting for an HRA Plan For DPI Purposes March 2009

2. General Information HRA • Funded by the district with contributions. • Contributions are available to eligible employees for the reimbursement of medical care expenses incurred. • Plan document defines • the contribution, • the medical care expenses covered and • carryover of unused funds to subsequent periods.

3. General Information What makes the accounting complicated is that each individual district determines the type of arrangement. • The proper accounting of an HRA plan for DPI purposes is dependent on the type of arrangement the district has.

4. Questions you need to answer • Is any part of the HRA a lump-sum contribution at retirement? • This is an OPEB benefit • Is so, has your district established a post employment benefit trust reported in fund 73? • Is this HRA lump-sum contribution being funded separately in the fund 73 trust?

5. OPEB benefit • If your district has established a trust and is funding this OPEB benefit in the trust • Follow the DPI requirements for funding a fund 73 trust

6. OPEB benefit • If your district has not established a trust but rather will pay the benefit from operating funds when it comes due • Follow the DPI requirements for pay as you go. Expenditure when retiree payment is made. • Function 290000, Object 290

7. Questions you need to answer • Is the HRA a benefit that is earned in the year that the district contribution is made? • May be available: • During employment • After employment • Both

8. Non-OPEB Benefit • Are District contributions held in a trust account (i.e. bank account)? • Is the trust account an irrevocable trust? • When employment is terminated, are the accumulated funds applied against the next year’s district contribution or allocated to remaining individuals?

9. Non-OPEB Benefit – Irrevocable Trust • All questions are yes • Example: • District Contribution • 10B711000-Trust $30,000 • XXE XXXXXX 249 $30,000 • 10B 815200 (NEW ACCT) $30,000 • 10B 711000-District $30,000 • Payment of costs • 10B 815200 (NEW ACCT) $21,200 • 10B-711000-Trust $21,200

10. Non-OPEB Benefit – Not an Irrevocable Trust • If the trust account is not an irrevocable trust OR accumulated funds go back to the district • Example: • Payment of costs • XXE XXXXXX 249 $20,200 • 10E 290000 290 $ 1,000 • 10B-711000 $21,200

11. Questions you need to answer • Are contributions held as assets of the district until payment is made to Administrator for claims? • Reported as an expenditure when the benefits are paid NOT when the District contribution is made

12. Non-OPEB Benefit – Not an Irrevocable Trust • Example: • Payment of costs • XXE XXXXXX 249 $20,200 • 10E 290000 290 $ 1,000 • 10B-711000 $21,200

13. How are Investment Earnings Reported? • Are investment earnings used to pay medical claims? • Irrevocable Trust • 10B 711000-Trust • 10B 815200 (NEW ACCT) • Asset-held • XXE XXXXXX 249 • 10E 290000 290 • 10R 280

14. How are Investment Earnings Reported? • Are investment earnings used to reduce the subsequent year contribution? • Irrevocable Trust • 10B 711000 • 10B 815200 (NEW ACCT) • Asset-held • 10B 711000 • 10R 280

15. How are Investment Earnings Reported? • Are investment earnings used to pay administrative fees of the trust? • Irrevocable Trust • 10E 290000 940 • 10R 280