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Certification

• Introduction to BASE®
• 1. Who is BASE®?
  2. What is an HRA?
  3. Who Qualifies for an HRA?
  4. Where do the savings come from?
• BASE® 125 Cafeteria Plan
• 1. What is a 125 Cafeteria Plan?
  2. Who is eligible for the BASE® 125 Plan?
  3. Where do the savings come from?
• BASE® Integrated HRA
• 1. What is an Integrated HRA?
  2. Who is eligible for the BASE® Integrated HRA?
  3. Where do the savings come from?
• Value of BASE®
• 1. How can BASE® products help my sales?

Section I: Introduction to BASE®

Chapter 3: Who Qualifies for an HRA? (Page 2 of 2)

S Corporations

Unlike a sole proprietor or partnership, S Corporation clients do not have to be married to take advantage of the savings that the BASE® HRA offers. However, S Corporation shareholders will need to be an employee of the corporation taking a W-2 salary in order to be eligible for tax savings of the BASE® HRA.

Many of your S Corporation shareholders may already be including the cost of their family's health insurance premiums in their W-2 wage. This perfectly legal step does allow for S Corporation shareholders to save Social Security/Medicare (FICA) taxes on their family's health insurance premiums, provided this is allowed based on plan design*.

As a result of continued scrutiny from the IRS, S Corporation shareholders are looking for additional ways to reduce their tax liability. The BASE® HRA allows shareholder-employees to replace a portion of their existing W-2 income with an employee benefit that is not subject to FICA tax. By utilizing an HRA, S Corporation shareholders will see both Social Security and Medicare savings.

This results in FICA tax savings each pay period based on medical expenses incurred during that period, as well as additional FICA tax savings each quarter, since the corporation will not have to pay matching FICA for the expenses incurred. The BASE® HRA provides the shareholders with even greater tax savings than without.

To be eligible for the BASE® HRA, an S Corporation employee/shareholder:

• Need NOT be married.
• Must pay for all or some of the family medical expenses.
• Must be taking a W-2 salary from the business.
• Wages must be subject to Social Security tax.

C Corporations

Many C Corporations already pay health insurance premiums for shareholders and employees. These C Corporations are able to deduct the cost as a business expense.

With an HRA, a C Corporation client will be able deduct up-to 100% of their health care expenses. With out-of-pocket medical expenses averaging roughly $6,400 annually, that's a lot of tax dollars you are able to offer the client.

C Corporations are not subject to the marriage requirements that exist for sole proprietors and partnerships. To be eligible for the BASE® HRA, a C Corporation:

• Need NOT be married.
• Must pay for all or some of the family medical expenses.
• Must be taking W/2 wages.

A Limited Liability Company (LLC) is an entity formed under state law. For federal income tax purposes, an LLC must be classified as a sole proprietor, partnership, or corporation. To learn if a member (owner) of an LLC qualifies for the BASE® HRA, we must determine which tax entity the business is operating under, and then follow the eligibility criteria of that entity.

*The Affordable Care Act may not allow the reimbursement of health insurance premiums based on business size and plan design. For additional details, please contact a BASE® Benefit Specialist.