Setting up a Health Reimbursement Arrangement (HRA) in QuickBooks Desktop or Online simplifies the administration of employee healthcare benefits. Employers begin by setting separate accounts in QuickBooks for HRA contributions and costs. This allows for precise tracking of monies allocated to reimburse employees' medical bills. Employers may automate HRA payments and deductions using integrated payroll settings, ensuring that they follow IRS rules. QuickBooks' user-friendly interface and reporting capabilities make the process even easier, allowing businesses to properly administer and monitor their HRA programs while offering vital healthcare benefits to employees.

Understanding Health Reimbursement Arrangements (HRAs)

Before diving into the setup process in QuickBooks, it's essential to grasp the basics of HRAs:

1. Types of HRAs:

• Integrated HRA: Paired with a group health plan that complies with Affordable Care Act (ACA) requirements.

• Stand-Alone HRA: Not paired with a group health plan, typically used for retirees or former employees.

2. Qualified Medical Expenses:

• Expenses eligible for reimbursement typically include deductibles, co-pays, prescriptions, and other medical services defined by IRS Publication 502.

3. Employer Contributions:

• Employers fund HRAs with a specified amount each year, which employees can use to cover medical expenses.

Setting Up HRA in QuickBooks Desktop

Step 1: Chart of Accounts Setup

1. Create HRA Liability Account:

• Go to Lists > Chart of Accounts.

• Right-click and select New.

• Choose Other Current Liability as the Account Type and name it (e.g., HRA Liability).

2. Create HRA Expense Account:

• Follow the same steps as above but select the appropriate Expense account type (e.g., HRA Expenses).

Step 2: Payroll Setup

1. Employee Setup:

• Navigate to Employees > Employee Center.

• Select the employee’s name and click Edit Employee.

• Go to the Payroll Info tab and add a new deduction item for the HRA contribution.

2. Company Contribution Setup:

• In the Payroll Item List, create a new item (e.g., HRA Company Contribution).

• Link it to the liability and expense accounts created earlier.

Step 3: Recording HRA Transactions

1. Recording Contributions:

• Each pay period, record the employer’s contribution to the HRA using the payroll item set up.

2. Reimbursement Process:

• Employees submit reimbursement claims along with receipts.

• Process reimbursements through Accounts Payable.

Setting Up HRA in QuickBooks Online

Step 1: Chart of Accounts Setup

1. Create Liability and Expense Accounts:

• Navigate to Accounting > Chart of Accounts.

• Click New and select the appropriate account types for HRA Liability and HRA Expenses.

Step 2: Payroll Setup

1. Employee Setup:

• Go to Workers > Employees.

• Select an employee and click on the pencil icon to edit.

• Under the Pay section, add a new deduction for HRA contributions.

2. Company Contribution Setup:

• In the Payroll Settings, navigate to Pay Policies > Benefits.

• Add a new benefit for HRA contributions, specifying the funding account.

Step 3: Managing Transactions

1. Recording Contributions:

• Each pay period, ensure HRA contributions are recorded correctly in payroll.

2. Reimbursement Process:

• Employees submit claims via the QuickBooks Online portal.

• Process reimbursements through Accounts Payable or Payroll.

Compliance and Reporting

Regardless of whether you use QuickBooks Desktop or Online, compliance with IRS regulations is crucial:

1. Documentation: Maintain thorough records of HRA contributions and reimbursements.

2. IRS Reporting: Ensure accurate reporting on Forms W-2 and 1095-C (if applicable).

3. Annual Reconciliation: Reconcile HRA accounts annually to ensure accuracy and compliance.

Conclusion

Setting up a Health Reimbursement Arrangement in QuickBooks requires careful planning and adherence to IRS guidelines. By following the steps outlined above, businesses can effectively manage HRA contributions and reimbursements while maintaining compliance with tax regulations. QuickBooks Desktop and Online provide robust tools to streamline this process, making it easier for employers to offer valuable health benefits to their employees.

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