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Reimbursing 213(d) Expenses in ACA environment


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Thanks in advance for any comments/guidance...

I have a small non-profit employer (7 employees) that currently sponsors an unintegrated HRA which will be terminated prior to 12/31. Primarily because all 7 employees are covered under other primary health coverage (5 under spousal coverage, 1 under a union plan and 1 under a retiree plan), the employer has not previously provided and does not intend to provide primary health coverage going forward. The employer also does not desire to simply gross up wages (wants to ensure monies are used for benefits) but, rather, wants to continue providing a vehicle to reimburse mdecial expenses on a pre-tax basis. Based on my understanding, by not providing primary health coverage, the employer payment guidance (TR 2013-03) effectively precludes the employer from doing so inasmuch as a standalone health FSA, standalone HRA or any other standalone medical reimbursement arrangement will violate either the prohibition on annual limits or preventive services requirements...

Am I missing anythin the employer could use on and after 1/1/2014 to reimburse 213(d) expenses on a pre-tax basis without providing primary health coverage?

Again, grateful for any comments...

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You're correct, no longer any way to reimburse premiums pre-tax in the absence of an employer group plan.

A partial solution beginning in 2015 will be for the employer to make available all the offerings in the SHOP and provide an employer subsidy for those EEs purchasing among the SHOP alternatives (unfortunately in 2014 there's only 1 offering in the SHOP)

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You never could reimburse 213(d) medical expenses through an FSA or an HRA.

For FSAs and HRAs 213(d) provides the definition only. Expenses are reimbursable under 105.

213(d) appears under the section of the IRC for Deductions from Income whereas 105 appears under Exclusions from Income. FSAs and HRAs are related to Exclusions and not to Deductions. Take a hard copy of the Regs and look at the section and chapter headings.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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