Say an employer institutes an HRA allowing for rollover of unused funds. Ten years down the road, the employer decides to terminate the plan.

What happens to the employees' funds?

Is this something you would define in your plan doc?

I can't seem to find guidance on this, although I did see it was not permissable to just pay a terminating or retiring employee a "bonus" equal to or based on the balance in his/her HRA.

I'm no expert on HRAs, but I could foresee an employer's plan building up quite a lot of rolled over funds, and ten years down the road that employer not wanting to be exposed to that. Or maybe that doesn't happen in practice?

Someone want to educate me?

Your questions assumes that there are "funds", when most HRAs are unfunded, "notational" (or phantom) accounts.

On termination of an HRA, the termination provisions in the plan documents would apply. If the plan is established pursuant to a collective-bargaining agreement, the CBA may supercede the plan provisions. If the plan is funded through a trust, employees' funds would likely be vested. If funds are left that the employer doesn't wish to appropriate, they should continue to be made available to employees for reimbursements until exhausted.

Your concerns are well founded. I believe in an HRA model that is funded through a trust to protect the employees accounts.

Without a trust to protect the employee's balances, the employer might not be able to make the now substantial "rollover" balances available in any form anyhow.

If the employer pays out the balances as a "bonus" or otherwise to the employees I believe that this would disqualify the whole plan, and most likely retroactively.

vebaguru,

Do you have any concrete info as to whether or not these Definity, Lumenos Aetna etc plans are really "unfunded" or "phantom". I have been getting conflicting reports, although I think that the reason is that many people have bought a "pig in a poke". They have no idea what it is that they got.