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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

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Bank accounts in HRA plan

originally posted: 11/22/2006  reposted: 2/21/2011

Q: We are trying to move forward setting up the new HRA and HSA accounts with Wells Fargo with FreedomBenefits.org as the third party administrator for 2007. If we were to open up the accounts through WF as the administrator, we would just open one account for the HRAs collectively. The only way I can see to open up regular checking accounts that we can control the amount of money that each employee can access is to set up an individual account for each employee - this way they can have debit cards and checks and use up to their allotted amount. I thought you had said that we only needed one account though? Was this only if the employees dealt with all their transactions as reimburseable? The employees specifically want debit cards and checks however... And how do we handle the HSA account for the owner? Can I set that up as a regular checking account as well that you can administer? Or do we need to open it at a bank like the HSA bank that can administer it and still provide checks and debit card? Do I need to open the accounts before you prepare the plan docs or do you need to prepare the docs before I open the accounts? Do you need account number information? Is there anything that I need to look for in opening these accounts?

A: Since this is a fairly common question, the specific instructions will be provided seperately in an article format at http://www.tonynovak.com/ARTICLES/How-to-establish-seperate-employee%20bank-accounts-in-a-small-business-HRA.htm The key difference here is that the FreedomBenefit.org service helps with self-administered employee benefit plans where Wells Fargo is a third party administrator. Small businesses tend to use self-administered benefit plans where larger firms hire a TPA with more capabilities but also at a higher cost. Freedom Benefits provides service at minimal cost and allows you a wide range of control in your own benefit plans. The only restrictions are those imposed by IRS or other applicable law. Freedom Benefits is not a third party administrator but rather serves as a financial adviser to the business and its employees to help set up and operate low cost employee benefit plans. Also be aware that business owners cannot participate in some employee benefit plans including a tax-qualified HRA. Please note that we do not recommend or endorse the practice of setting up separate accounts for a small business HRA.

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