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Tegrit's IHA Program is an employer-sponsored savings account to help employees set aside money to cover the costs of post-employment health care. Under the program, employers may make tax-free contributions to an employee's individual account. Frequently Asked Questions about Tegrit's IHA Program What is the Tegrit IHA Program? The Tegrit IHA Program is an employer-sponsored program that allows employees to save for medical expenses and/or health insurance premiums after termination of service from their employer. All contributions made to the program are tax-free, will accumulate tax-free and since payouts are used for reimbursing medical expenses, they will remain tax-free. << Back To Top What legal authority exists to offer the IHA Program? The Internal Revenue Code, Section 115 (1) states in part that gross income does not include "income derived from" exercise of any essential governmental function and accruing to a "political subdivision" of a State. The IRS has ruled that providing health benefits by a political subdivision for its employees and retirees is an "essential governmental function." (Revenue Ruling 77-261 and 90-74). << Back To Top Who chooses how much and what dollars will be put into the IHA Program? Employees covered by a bargaining unit: Amounts to be put into the account must be negotiated or agreed upon by both the bargaining unit and the employer and apply to all members of the unit. Employees not covered by a bargaining unit: Amounts to be put into the account must be included in a personnel policy and must cover all employees covered under the personnel arrangement. << Back To Top What types of payments can be put into this tax-free account? Employer Contributions: For example, an employer could elect to set aside a specific dollar amount into employees' accounts, or set aside a percentage of employees' salaries into the accounts. Mandatory Employee Contributions: For example, a portion of the next salary increase could be set aside in the IHA Program. Mandatory Leave Conversion: For example, an employer pays unused vacation or sick leave or severance pay at the time of termination. All or a portion of the severance pay may be set aside in the IHA Program. As an example, annual "use it or lose it" vacation or sick time may be put into the IHA. << Back To Top How would employees benefit from the IHA Program? The IHA Program allows employees to put money in their employee accounts to cover the costs of health insurance or medical expenses after termination of their employment. While deferred compensation plans or retirement accounts provide a tax-deferred benefit, amounts paid out (other than post-tax contributions) are considered taxable income. Under the IHA Program, amounts contributed are tax-free (as are earnings) and no taxes are paid on amounts paid out since they may be used only as a reimbursement for health insurance premiums or to cover out-of-pocket medical expenses. This tax advantage could result in significant savings for participants and their families. For example, let's say a participant is eligible for $2,000 in severance. If paid in cash, after subtracting federal, state and FICA (Social Security and Medicare) taxes, the net amount of the payment would be approximately $1,200. If that same amount were transferred into an IHA Program, the entire $2,000 would be available to pay for health care coverage. << Back To Top How would the employer benefit from the program? The IHA Program allows the employer an opportunity to offer a low-cost benefit to its employees that can be used to cover the rising cost of health care and save the amount that would have been used for FICA taxes (7.65 percent). << Back To Top What responsibilities does the employer have regarding the administration of the IHA Program? The main responsibility is to determine how much will be contributed to the IHA Program and make contributions to the program on behalf of eligible employees. Tegrit will provide the employer with materials to get started. << Back To Top How will assets be invested in the IHA Program? Assets in the IHA Program will be invested in the Tegrit OPEB Trust. << Back To Top Will participants receive statements? Yes, quarterly statements will be mailed to participants. << Back To Top When are participants eligible to begin receiving reimbursements to cover medical insurance or expenses? Participants are eligible to be reimbursed from the account under any of the following circumstances: - Upon termination of employment
- While collecting a disability benefit from any public pension plan
- While on medical leave (six months or longer).
<< Back To Top How will reimbursements be made from the IHA Program?Participants will be reimbursed for out-of-pocket medical expenses allowed under IRS rules (such as Publication 502) after receipts for allowances expenses are submitted and received by the program administrator. Reimbursements will be processed monthly. << Back To Top How are benefits from the IHA Program treated for tax purposes? Reimbursements paid from the IHA Program to cover health insurance or medical expenses will not be taxed. No income tax withholding or reporting is required. However, it is important to note that these funds can be used only as reimbursements for health care costs or the cost of health insurance, and at no time can the funds be accessed for other purposes. A complete listing of items eligible for reimbursement under the program is available from the IRS. << Back To Top Contact Tegrit Financial Group to obtain more details about Tegrit OPEB Services.
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IHA Program 
