Your Guide to Medical Travel Accounts (MTAs)

What is an MTA?

Medical travel benefits may be designed as a Medical Travel HRA or an Excepted Benefit Employee Assistance Program (EAP). Excepted Benefit Medical Travel Accounts (MTAs) are employer-sponsored employee assistance programs that are specifically designed to pay for medical travel. Expected Benefit Medical Travel Accounts accounts are employer-owned and employer-funded and employees will be assessed income taxes for the reimbursements they receive. Since these are after-tax excepted benefits, employers have much more flexibility and control over how the program is designed.

Employers choose:

• How much they’ll reimburse and at what cadence. For example, employers can choose if they’ll offer their allowance on a monthly, quarterly or yearly basis.
• Who qualifies to participate in the MTA as long as the eligibility policies aren’t discriminatory in nature.
• The travel expenses for which they’ll reimburse. For example, they choose if they’ll only reimburse for travel that’s outside a certain radius of the employee’s home, whether or not they’ll cover all lodging or only lodging above a certain amount per night, etc.
• Verification requirements for the travel expenses (not the medical procedure).
• Plan duration and plan-end extension options such as offering a runout period or permitting a carryover amount.
• Whose medical travel is eligible. Employers can choose whether or not they will cover travel for spouses’ and dependents’ care or solely medical travel necessary for the employees’ care. They can also choose if they will cover necessary or nonessential companion travel expenses.

Since MTAs are employer-owned, any unused portion of the travel allowance gets reabsorbed by the employer at the end of the plan term.

Expected Benefit MTAs makes them distinct from Medical Travel HRAs, which are not HSA compatible and are capped by the IRS at $1,950 per year, with caps on lodging at $50 a night and mileage reimbursement at 22 cents a mile (as of 2023).

How do I know if I qualify to offer or participate in an MTA?

MTAs aren’t tied to any specific health insurance plan nor are they only available to certain types of employers or employees. That means any employer that wishes to offer an MTA to its employees may do so. And any employees whose employer offers an MTA may participate in that benefit as long as they meet their employers’ benefit participation requirements.

For employers

Any employer is eligible to offer an MTA to their employees, but the Affordable Care Act (ACA) includes certain plan design regulations for Excepted Benefit EAPs. In order for employers to stay in compliance with the ACA, they must meet these requirements when offering their employees a medical travel benefit:

1. They cannot simply amend their corporate travel reimbursement policy.
2. It can be added as part of their existing medical plan, subject to copays and coinsurance requirements.
3. It can be offered as a stand-alone program, like the Lively MTA. If the employer chooses to offer a stand-alone MTA, it must be offered to either all employees, whether or not they’re enrolled in the company’s group health plan, or to a nondiscriminatory group of employees, regardless of whether or not they’re enrolled in the group health plan.
4. The medical travel benefit must be ERISA, COBRA, and HIPAA compliant.

For employees

Employees can only access an MTA through their employer. That means in order for an employee to be eligible to participate in an MTA, their employer must first offer this benefit and then they must meet their employer’s benefit eligibility criteria.

There are federal, state and sometimes local laws that determine the types of benefits employers are legally required to offer their workers. Most of these laws deal with W2, full time employees and require pre tax benefits like health insurance and workplace retirement savings accounts. An employer is not required to offer an MTA. If an employer does offer an MTA, they must do so in a non-discriminatory way.

If you’re wondering whether or not you qualify for your company’s MTA, you should ask your HR Department about the company’s policies regarding this benefit. If it’s offered to full time employees, this will typically apply to you if you are a W2 worker and work at least 30 hours per week at the company. An employer is not federally required to offer 1099 contract workers any type of benefit even if they work the equivalent of full time hours for the company, but they can choose to do so. In fact, an employer can choose to allow 1099 workers to participate in their entire suite of benefits.

What is it commonly used for?

MTAs are commonly used to receive medical care that isn’t available locally. That means people who live in rural areas can reimburse for mileage to visit the doctor or a dentist for routine checkups, people who need to travel to regional medical centers to receive treatment from a specialist can pay for the transportation to get there, meals, and lodging for themselves and possibly a necessary companion.

The definition of “local” is determined by the employer designing the MTA, but typical radii are either 50 or 100 miles from the participant’s home.

What are the eligible expenses?

Employers can choose to allow their MTAs to cover a wide range of expenses including (but not limited to):

• Gas and mileage on personal car
• Overnight lodging for participant and necessary travel companion (as long as it’s not deemed a “luxury accommodation”)
• Ambulance fees
• Parking fees
• Rental car
• Public transportation like bus, train, taxi, ferry or metro
• Airplane ticket
• Overnight hospital stay
• Tolls

Employers can choose to reimburse only for travel that’s necessary for medical care the employee and plan participant needs, they can choose to include the travel costs of a necessary travel companion, and they can choose to cover medical travel necessary to treat the participant’s spouse and dependents. Employers can also choose the radius from the employee’s home that constitutes medical travel (i.e. 50 miles, 75 miles, or 100 miles).

If employees want to know what is considered a reimbursable expense through their MTA, they should consult their company’s plan documents.

What is ineligible?

Generally speaking, MTAs can’t be used for the following expenses:

• Medical care while traveling
• Travel to and from work
• Auto insurance
• Vehicle registration
• Maintenance and repair costs on personal vehicle
• Traffic or parking tickets
• Personal travel expenses

In addition to these expenses that are always ineligible, any of the “eligible” expenses that are not covered under their employer’s MTA, or expenses for care received inside the qualifying radius would also be ineligible.

Is it taxable?

MTAs are post-tax benefits for employees and tax-deductible business expenses for employers, so they will affect each party’s taxes differently.

Employers

Employers should talk to their tax and legal advisors on how to treat employee MTA reimbursements in accounting. Employers are still responsible for paying their portion of the associated Social Security and Medicare taxes on the reimbursed amounts because these reimbursements are added to employees’ gross income.

Employees

Employees must pay income taxes on their MTAs which means the amount for which employees reimburse will be added to their gross income and taxed at the appropriate income tax rate.

What are the benefits?

As the reshuffling of workers that occurred during the pandemic looks to be more permanent than companies had previously expected, and as healthcare policies and health insurance plans change in different states, medical travel benefits are becoming increasingly popular. In fact, a recent survey conducted by Mercer found that 44% of large employers are currently offering at least one vehicle through which employees can reimburse for medical travel. Employers with 5,000 or more employees are even more likely to offer medical travel benefits at 56%.

The reason reimbursing for medical travel is becoming so popular is that this type of benefit can have a profoundly positive impact on both employees’ lives and the company overall.

Benefits of offering an MTA for employers

There are many benefits to employers in offering medical travel benefits to employees through an MTA. Including:

• Healthier workforce. No matter where your employees live, the best medical care they can receive for their needs might not be within a comfortable day’s drive. And the cost to receive that care might be enough of a deterrent that the employee will either receive suboptimal care closer to home or no care at all. This could lead to adverse outcomes which lead to your employee being absent more days and lower productivity. By offering employees a way to pay for medical travel you not only incentivize them to receive the care they need, you show them that you value their health.
• Lower financial stress. More of your employees are struggling with financial stress than you think. In fact, 49% of employees report feeling financial stress and spend 3-4 working hours each week dealing with related issues. By lowering the financial burden of receiving needed medical care, whether it’s for the employee, their spouse or dependents, you lower the stress they feel, enabling them to be more productive at work.
• Supports and advances the goals of Diversity, Equity, and Inclusion (DEI) initiatives. For example, it helps those living in rural areas with a scarcity of specialists or reproductive care access throughout the U.S. By offering an MTA, you help ensure your employees can receive the safe reproductive care they need.
• Increased loyalty and improved company culture. Employees who feel supported by their employers are more likely to stay. And high turnover rates are expensive. Not just because it can cost almost 2x an employee’s annual salary to replace them, but because high turnover rates lower company morale, which in turn decreases productivity and leads to more turnover. Supporting employees financially with an MTA shows them they’re valued.
• It’s a flexible supplemental benefit. They are also compatible with any kind of health insurance plan and can be participated in while also participating in an FSA, HSA, or HRA.
• Employers have almost complete control over account administration. You can design your plan to fit your budget and your company values.
• Cost-effective benefit. Any unused funds are reabsorbed by the employer at the end of the plan term. Plus, since employers only pay for the reimbursements employees request, they have control over benefit administration and plan design, and can write off the reimbursements employees request, an MTA is a cost-effective way to financially support employees.
• More effective recruitment efforts. This is especially important if you want to cast a wide net in the employee pool or actively recruit remote employees that might not live close to a regional medical center.

Benefits for employees

A medical travel benefit like an MTA opens up employees’ opportunities to receive the medical care both they and their loved ones need. It also gives them greater choice and empowers them to make the best decisions for them in terms of their medical care. Here’s an in-depth look at the benefits of an MTA for employees:

• Gives employees greater flexibility and choice in the medical care they receive. By financially supporting the travel needed to receive treatment, MTAs enable employees to choose from the best care options available, period. Not just the best care options within a small radius of where they live.
• Supports employees’ physical health. People are more likely to receive medical care if they have a way to pay for it. People who are not financially supported in receiving healthcare, either by way of health insurance or an after-tax excepted benefit, are more likely to forgo getting treatment. Which means their symptoms and overall condition are likely to worsen, requiring them to receive more expensive treatment later. By financially supporting the travel needed to receive necessary medical care, MTAs help ensure employees are able to take care of their physical health.
• Supports employees’ mental health. Healthcare costs are one of the main causes of the financial stress that employees are feeling. MTAs help lower the financial stress associated with receiving medical treatment by financially supporting the necessary travel. And lower financial stress can lead to improved mental health.
• Supports employees’ financial health. Employees now need to make $166 for every $100 they made 20 years ago in order to keep up with inflation. But wages aren’t keeping pace. One way to support employees’ financial health outside of raising wages across the board, is to provide after-tax benefits like an MTA that pay for necessary expenses that aren’t covered by company travel policy, the group health insurance plan or some other pre-tax benefit. Even though employees must pay income taxes on the reimbursed amounts, this is typically a small amount in comparison to the overall travel cost that was reimbursed, making an MTA a financially advantageous benefit for employees.
• Supports employee access to safe reproductive care. MTAs may help employees seeking safe access to reproductive care throughout the U.S. for service otherwise unavailable within a reasonable distance from their primary residence.
• Enables employees to pay for a necessary companion for the trip. In most cases, medical travel reimbursements through group health plans, FSAs and HSAs will only cover travel for the patient itself. But employers can choose to allow employees to bring along a necessary companion and cover that person’s travel costs via the MTA. This is an important feature of the MTA since traveling for medical care can be physically, emotionally, and mentally taxing and oftentimes requires the support of a companion. This feature also enables employees to reimburse for their travel expenses should they need to travel for medical care for a spouse or dependent.

How does it differ from an HSA or an FSA?

While all three accounts can be used to reimburse for medical travel, HSAs and FSAs are distinctly different from each other and an expected benefit MTA. Here are the differences as they pertain to each account type.

Difference from an HSA

These are the features of an HSA that pertain to medical travel and how they differ from an MTA:

• HSAs are a pre tax benefit, MTAs are a post tax benefit. All contributions and distributions from HSAs are free of income tax as long as they’re used to pay for qualified medical expenses. All reimbursements through MTAs are subject to the appropriate income tax rate.
• They are funded differently. Anyone can deposit money into an HSA– the employee, the employer, family members, neighbors, as long as the account holder is actively enrolled in a High Deductible Health Plan (HDHP) and the deposits don’t exceed the applicable IRS limit for that year. MTAs are solely funded by the employer.
• HSAs have IRS-imposed annual limits. Since HSAs are a pre tax benefit, the IRS tightly regulates how much can be deposited into an HSA account on an annual basis and they adjust this limit every year. MTAs have no IRS-imposed annual limits so employers can choose how much they’ll reimburse for and at what cadence (monthly, quarterly or yearly).
• HSAs have restrictions on the types of medical travel expenses that are eligible for reimbursement. For instance, HSAs have a restriction on how much employees can reimburse for lodging when traveling for medical care ($50 per night for an individual and $100 if traveling with a companion). With an MTA, employers can choose how much they’ll allow employees to reimburse per night for lodging and other expenses.
• HSA balances roll over from year-to-year and employees never lose access to their account. Employees own their HSA account so they never lose access to the contributions that have previously been made (even if they no longer have an HDHP). This is not true with an MTA. MTAs are owned by the employer so the employer gets to decide what happens to any unused balance at the end of the plan term.
• HSAs can be used to pay for a wide range of qualifying medical expenses. The list of expenses that are considered eligible for payment and reimbursement via an HSA is extensive and includes medical travel. The sole purpose of an MTA is to reimburse for necessary medical travel.
• HSAs must be paired with an HDHP. In order for employees to actively deposit money (or have anyone else deposit money) into an HSA, they must be actively enrolled in either an individual or family HDHP insurance plan. Employees can participate in an MTA regardless of the health insurance plan they have (or if they even have one).

Difference from an FSA

These are the features of an FSA that pertain to medical travel and how they differ from an MTA:

• FSAs are a pre tax benefit, MTAs are a post tax benefit. All contributions and distributions from FSAs are free of income tax as long as they’re used to pay for qualified medical expenses. All reimbursements through MTAs are subject to the appropriate income tax rate.
• They are funded differently. Both employees and employers can deposit money into an FSA. MTAs are solely funded by the employer.
• FSAs have IRS-imposed annual limits. Since FSAs are a pre tax benefit, the IRS tightly regulates how much can be deposited into an FSA account on an annual basis and they adjust this limit every year. MTAs have no IRS-imposed annual limits so employers can choose how much they’ll reimburse for and at what cadence (monthly, quarterly or yearly).
• FSAs have restrictions on the types of medical travel expenses that are eligible for reimbursement. For instance, FSAs have a restriction on how much employees can reimburse for lodging when traveling for medical care ($50 per night for an individual and $100 if traveling with a companion). With an MTA, employers can choose how much they’ll allow employees to reimburse per night for lodging and other expenses.
• Employers are restricted in how much they’ll allow employees to roll over from an FSA to the following year. If employees have unused balances remaining in their FSA at the end of the plan year, employers are restricted in how they handle this money. They choose to either allow employees a 2 ½ month grace period in which to use the leftover money, or they can allow them to roll a small portion of the money (adjusted annually by the IRS for inflation) to the following plan year. With an MTA, employers have complete freedom in how they want to treat unused balances at the end of the plan year.
• FSAs can be used to pay for a wide range of qualifying medical expenses. The list of expenses that are considered eligible for payment and reimbursement via an FSA is extensive and includes medical travel. The sole purpose of an MTA is to reimburse for necessary medical travel.

Is a Medical Travel Account right for me?

There are many benefits to offering and participating in an MTA. To determine if these are the benefits you’re seeking, here are some things to think about.

For employers

In order to determine if offering an expected benefit MTA to your employees is the right thing for your company, you must decide the benefits you’d like to cover, your budget and whether or not there’s another way to cover these benefits that might be more economically efficient.

1. The benefits you’d like to cover. Typically, MTAs are designed to cover all forms of transportation, necessary overnight lodging (as long it’s not a luxury accommodation) and necessary meals. You can decide if the expenses reimbursed must all be for the employee or if a necessary travel companion can be included. You can also decide whether or not you’d like to reimburse for medical travel necessary for spouses and dependents.
2. Your budget. Given the expenses you’d like to cover, have you budgeted enough to fund an MTA for every employee. Not every employee will participate and not every participant will reimburse for the maximum allowable amount. But you should budget as if they do. Included in your budget should be the cadence at which the MTA renews. According to a recent Mercer survey, 25% of employers offer a median allowance of $5,000 per occurrence, 24% of employers offer a median allowance of $4,000 per year, and 18% of employers offer a median allowance of $10,000 per lifetime.
3. Is there another way to reimburse for these expenses? If you already offer an HSA and/or an FSA, there are other ways your employees can reimburse for medical travel expenses. However, since these types of accounts are pre tax and can be used to pay for a wide range of expenses, and in the case of an HSA, can be used as a retirement account, it might be prudent to offer an MTA and allow employees to reserve their pre tax account for other expenses.

As an employer an MTA will be right for you if your budget for your employees’ MTAs is both enough to cover your desired expenses and to be competitive in the labor market. It can also be right for you if you want to augment your current benefits package with a targeted benefit that allows employees to keep their pre tax accounts for other expenses.

For employees

For employees to determine whether or not participating in their employer’s MTA is right for them they should consider:

1. Where do they receive most of their medical care? If they live in a rural setting and must travel to a regional medical center to receive even basic checkups, an MTA can be a supportive benefit for them.
2. Do they, their spouse or one of their dependents have a condition that might require traveling to receive specialist care? If the answer is yes, an MTA can help lower the financial stress associated with receiving this treatment.
3. Can they afford the income tax associated with these reimbursements? While the amounts of the reimbursements themselves will outweigh the associated income tax, it is still important that employees are aware that income taxes will be assessed.

For employees, participating in an MTA has enormous benefits due to the fact that these accounts support travel that is necessary to receive required medical treatment. Inherent in that definition is the fact that these are expenses employees would likely already be paying for out-of-pocket (post-tax) or from their pre tax HSA or FSA. By participating in the MTA, they are able to reimburse for these very necessary expenses and save their pre tax accounts to pay for other qualified medical expenses.

How to get started with an MTA

Employers that want to offer an MTA can get started in two ways:

1. Ask their benefits broker about adding this account type to their current package.
2. Research MTA administrators on their own to find the right fit.

Employees that want to participate in their employer’s MTA must choose to do so during open enrollment.

Sign up with Lively

Lively is your partner in offering the most comprehensive benefits package for your budget. We specialize in ancillary benefit accounts like HSAs, FSAs, HRAs, LSAs and MTAs that augment your group health and dental plans with support your employees need and value. Our accounts are well-designed and easy to use, and when employers or employees need help, our best-in-class customer support is available. Get in touch.

Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.