Decoding the Health-Care Alphabet Soup: RMBAs and RRAs

Various players in the benefits and insurance industry are working to develop accounts that will address retiree health. Fidelity has helped to develop a proposal for a new type of account, called a retiree medical benefit account (RMBA or "rumba").

The RMBA would function something like a medical 401(k), allowing individuals to, for example, place $500 or $1,000 per year in the account tax free, in order to have these funds grow tax free and be available for tax-free withdrawal for qualified medical expenses at retirement age.

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"It functions much like an HSA, separate from the need for a high-deductible health plan," explains Brad Kimler, senior vice president of the Health and Welfare Consulting group at Fidelity Employer Services Co.

But while the idea has been floated on Capitol Hill, it has not yet received much attention or traction, primarily because of concerns about its cost in tax revenue. Anyone could open one, regardless of his or her current health benefit. The worry is about yet another drain on the federal budget for existing benefits such as Medicare.

Meanwhile, Aetna has launched its HealthFund Retiree Reimbursement Accounts, adding RRA to the acronym mix. RRAs are a form of HRA, or health reimbursement account. Employers make contributions to the employee's account on a regular basis, and those funds are then available to reimburse qualified health-care expenses in retirement--a kind of deferred HRA arrangement.

September 1, 2005

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