What are the group coverage HRA employee classes?

Group coverage health reimbursement arrangements (HRAs) have become a popular way for employers to supplement traditional group health plans and offer more flexible, cost-effective benefits. For benefits brokers and HR leaders at mid-sized companies, understanding employee classes within group coverage HRAs is essential. Employee classes let employers tailor HRA employee benefits, control costs, and meet the unique needs of their workforce-all while following federal regulations. This article explains what employee classes are, how they work in group coverage HRAs, and why they matter for your group health plan strategy.

What Are Employee Classes in Group Coverage HRAs?

Employee classes are categories employers create using legitimate, job-based criteria. These classes are at the heart of group coverage HRAs, allowing companies to customize eligibility rules and benefit levels for different groups within their workforce. By segmenting employees, employers can offer more personalized HRA employee benefits, making their group health plan more attractive and effective for everyone.

Why Do Employee Classes Matter?

• Customization: Employees in different roles have different needs. Employee classes help employers match benefits to those needs.
• Cost Control: Employers can focus resources on key talent or roles, balancing the budget while staying competitive.
• Compliance: Federal law requires classes to be based on objective, job-related criteria, helping avoid discrimination.
• Retention & Recruitment: Tailored benefits help attract and keep top talent, especially in competitive industries.

How Employee Classes Work in Group Coverage HRAs

Employers use employee classes to define who’s eligible for the HRA and how much each group receives. Classes are established using clear, job-based criteria-such as full-time vs. part-time status, job level, or pay structure.

Structuring Eligibility and Allowance Amounts

Eligibility:

Employers decide which classes are eligible for the HRA. For example, a company might only offer the HRA to full-time employees to focus on retaining core staff.

Allowance Amounts:

Employers can set different reimbursement limits for each class. For instance, managers might get a higher monthly allowance than hourly staff. This flexibility lets companies reward performance and align benefits with business goals.

Other Requirements:

Within each class, employers can set rules like requiring an explanation of benefits (EOB) for reimbursements, setting deductibles, or requiring employees to pay a percentage of eligible expenses before reimbursement.

The Seven Standard GCHRA Employee Classes

Group coverage HRAs (GCHRAs) allow employers to use up to seven employee classes, each based on job-related criteria:

• Full-Time Employees: Usually those working 30 or more hours per week (or 40, depending on company policy).
• Part-Time Employees: Employees working fewer than 30 or 40 hours per week.
• Salaried Employees: Workers paid a fixed annual salary, generally exempt from overtime.
• Hourly Employees: Employees paid by the hour, often eligible for overtime.
• Managers: Employees in management positions.
• Executives: Executive-level employees, often receiving the highest level of benefits.
• Staff Members: Regular employees who don’t fit into other leadership or pay structure categories.

Employers can further refine these classes by family status or age, but must follow federal rules. For example, older employees in a class can receive up to three times the allowance of younger employees in the same class.

Customizing HRA Employee Benefits by Class

Employee classes allow employers to customize HRA employee benefits for different groups. Here’s how companies use this flexibility:

• Rewarding Tenure or Performance: Higher HRA allowances for managers or employees with longer service.
• Supporting Diverse Needs: Adjusting benefits for part-time, seasonal, or remote workers.
• Aligning with Organizational Goals: Focusing benefits on roles critical to business success.

Example Scenarios

• A tech company offers $600/month to full-time engineers, $400/month to part-time support staff, and $800/month to executives.
• A retail chain provides a basic HRA for all staff, but managers receive an additional allowance for family coverage.

The Role of Employee Classes in Cost Management

Segmenting employees into different classes gives employers more control over their health benefits budget. For example, offering higher allowances to executives and managers while providing standard benefits to other staff helps balance the overall expenditure. This strategy ensures the company can maintain a competitive benefits package without overspending, which is especially important as the maximum annual employer contribution for an excepted-benefit HRA will increase to $2,150 in 2025.

Impact on Employee Satisfaction and Retention

Tailoring benefits through employee classes positively impacts employee satisfaction. When employees see that their benefits match their role and needs, they’re more likely to appreciate the company’s efforts and stay loyal. Customized benefits can be a differentiator that sets a company apart in a tight labor market.

Technology and Administration of Employee Classes

Modern benefits administration platforms, such as Venteur, make managing employee classes within group coverage HRAs much easier. These platforms allow HR teams to define classes, set eligibility criteria, and adjust allowance amounts with just a few clicks. Automation reduces administrative burden, minimizes errors, and ensures compliance. Employees also benefit from transparent access to their benefits information.

Future Trends in Group Coverage HRAs

As the workforce evolves, so will the use of employee classes in HRAs. Expect more granular classifications based on remote work status, job function, or even employee preferences. Employers will increasingly use data analytics to optimize their benefits offerings, ensuring they meet the diverse needs of their workforce while controlling costs.

How Employee Classes Support Diversity and Inclusion

Employee classes also support diversity and inclusion by recognizing and addressing different employee groups’ unique needs. For instance, part-time workers or employees with caregiving responsibilities might receive tailored benefits that acknowledge their circumstances. This approach helps create a more inclusive workplace where all employees feel valued.

Tips for Communicating Employee Classes to Your Workforce

Clear communication about employee classes and benefits is vital. Employers should provide detailed information about how classes are defined, eligibility criteria, and the benefits available to each class. Using simple language and multiple communication channels ensures that employees understand their benefits and how to access them. Transparency builds trust and encourages employees to make the most of their health reimbursement arrangements.

Legal and Compliance Considerations

Using employee classes must always comply with federal regulations. The rules require that classes be based on objective, job-related criteria and applied consistently. Employers cannot use classes to discriminate against individuals or groups.

Key compliance points:

• All employees in the same class must be offered the same terms.
• Allowances can vary by age and family status, but only within set limits.
• Classes cannot be used to unfairly exclude employees from benefits.

Employee Classes in Other HRA Types

Other HRA types, such as Individual Coverage HRAs (ICHRAs), allow even more employee classes-up to 11 in some cases. These include classes based on location, union status, waiting period, and more. However, the core principles of fairness and compliance remain the same.

Best Practices for Setting Up Employee Classes

• Define Clear Criteria: Use job titles, hours worked, or pay structure-not subjective factors.
• Document Everything: Keep records of class definitions and eligibility rules.
• Communicate Clearly: Make sure employees understand their class and what benefits they receive.
• Review Regularly: Update classes as your workforce or business needs change.

How Employee Classes Impact Group Health Plan Strategy

Employee classes are a powerful tool for designing a group health plan that fits your company’s needs. By segmenting benefits, you can:

• Control costs by focusing resources where they matter most.
• Attract and retain talent with tailored benefits.
• Stay compliant and avoid legal pitfalls.
• Offer flexibility in a rapidly changing workforce.

For benefits brokers and HR leaders, mastering employee classes is key to delivering value to both the company and its employees.

By understanding and using employee classes effectively, companies can build a group health plan that meets the needs of their workforce and supports long-term business goals. For more guidance or to see how Venteur can help you design a flexible, compliant HRA solution, reach out to our team today.