Medicare Advantage premium reimbursement from GCHRA

[LABenefits]

I'm reviewing an HRA plan document that includes both active employees and retirees as participants.   ACA compliance is through integration with employer's group health plan.   At age 65, retiree group is no longer eligible to participate in employer's group health plan.   No new employer contributions are made to HRA  at age 65 and up, but these retirees can use rolled over account balance to obtain reimbursement for medical expenses and premiums.   Employer is reimbursing retirees for Medicare Advantage premiums.  While reimbursement of premiums for individual market coverage is clearly prohibited in terms of ACA integration rules (Notice 2015-87), is reimbursement of Medicare Advantage premiums considered individual coverage under existing guidance?  Is there any way to argue that this is a permissible arrangement for ACA compliance purposes?  Or any way to argue that the retiree reimbursement provisions can be treated as a separate group health plan thereby utlizing the retiree-only exemption, even though the retirees are referenced in the existing plan and SPD that relies upon group health plan integration?   (Employer has a wrap plan for ERISA reporting/disclosure purposes).  Given the severity of ACA penalties, we're looking for any helpful guidance insight on this issue.  Thanks.

[Brian Gilmore]

There's an additional integration rule in Notice 2015-17, Question 3, but that applies only to Part B and Part D.  So I think you're going to need to just break out the retiree-only piece into a separate ERISA plan to take advantage of the retiree-only exception.  That's the easy workaround everyone uses for retiree HRAs.  You don't want to be having to argue the retiree piece is operating as a separate plan even though it's wrapped into the main 501 with actives--that would be a tough sell.  Especially since there's not much guidance there and it's easy to establish/maintain a separate retiree-only plan to avoid the issue.

[LABenefits]

Thank you so much for your response and input, Brian.   That is the conclusion I've come to as well given the lack of reference in Notice 2015-17 to Medicare Advantage premiums.    I'm concerned with regard to past operation and plan documentation given the severity of the ACA penalties.    Although I'm not sure if the employer's past operation and administration of HRA has changed in terms of the types of premiums it has reimbursed, the HRA plan documentation I've reviewed includes premium reimbursement language for retirees going back at least 8 years.    Any thoughts on how to best address or limit past potential ACA penalties in this regards?   

I appreciate your input, Brian!   Thank you again.   

[Brian Gilmore]

I don't see any way to address the potential past labilities here under §4980D.  Any attempt to modify the terms at this point can't change how it was documented/administered in the past.  Ultimately, I think the only thing you can do it correct the situation going forward and hope that the skeletons in the closet remain there.  At least you've cut off the exposure prospectively.

[LABenefits]

Thank you, Steve.   This is one of those difficult compliance situations.  We'll cut off the risk going forward and go from there.   Thank you again--appreciate your input very much.     

[LABenefits]

Sorry Brian -- I typed Steve by mistake!

Thank you, Brian!

[LABenefits]

I have one follow-up question regarding establishing a retiree-only HRA (breaking it out in the documentation as separate from the current plan that covers both active employees and retirees).  There are two groups of retirees:  (1) those between 55 and 65 who continue to be eligible to participate in group coverage to the same extent as an active employee (they also receive an annual contribution in the same amount as active employees); and (2) retirees 65 and above who are no longer eligible to participate in the employer's group health plan, no longer receive any HRA annual contribution, but who can use accumulated account balances for permissible reimbursements.   My thought is that the new retiree-only HRA would cover both groups of retirees,.   Is there any reason not to put both groups in one retiree-only HRA?   I want to make sure I'm not missing anything.   Thanks.  

[Brian Gilmore]

As long as there aren't any actives in there to blow the excepted benefit status, I don't see any issues with combining the pre-65/post-65 retirees into one ERISA plan.  I assume pre-65 it's a cost-sharing HRA for expenses under the group plan, which is of course very different than a Medicare Advantage premium HRA, so those distinctions will have to be very clear.  You'd also want to be clear if If there are any different eligibility terms other the age status for each component.

[LABenefits]

Thank you, Brian.   I agree that we will need to be sure that the different classes of retirees are clearly distinguished in the Plan document and that no actives/re-hires are included in the retiree-only HRA.    I wanted to be sure I wasn't missing something if we put all retirees under one retiree-only HRA and that there wasn't a clear advantage to keeping the 55-65s combined with the active employees.   

Again, I'm so appreciative of your feedback.