Personal Benefit Account Providing Medical and Other Benefits - Is It an HRA for Section 111 MMSEA Reporting?

[rocknrolls2]

A client has a VEBA that provides for certain benefits including a personal benefit, which is an individual account that is funded exclusively by employer contributions. The assets in the account can be applied to pay for medical benefits to the extent not otherwise covered under the primary medical plan, severance benefits, supplemental unemployment benefits, disability benefits, scholarship benefits for dependent children for post-secondary education or for payment of premiums for COBRA Coverage or retiree medical coverage. The questions is whether the personal benefit account is an HRA It walks like a duck in that it is totally employer funded, quacks like a duck in that it can be applied to reimburse medical expenses and pay certain medical premiums, but, if it goes into the pond for a swim, its feathers are all wet and it cannot fly for at least 30 minutes after it emerges from the pond -- to the extent that it pays more than eligible medical benefits. IMHO this is NOT an HRA and would not have to do Section 111 filing with CMS. Thoughts?

[Brian Gilmore]

Tough one.  I'd say it is a group health plan under the MSP rules generally because it reimburses medical expenses.  The Section 111 rules have specific HRA rules, which I'd be inclined to agree do not apply to this arrangement.  Although the way the Section 111 rules define HRA seems pretty broad, the fact that non-medical expenses are included make this hard to shoehorn into any HRA definition (something about feathers being too wet).

I'm not sure that leaves you in a better place, though.  The HRA rules at least restrict the Section 111 reporting to those that make $5k+ available annually.  Seems to me this arrangement gets roped into reporting regardless of the amount made available because it isn't eligible for that HRA conditional relief.  In other words, to the extent it can reimburse medical expenses, it's probably just a plain vanilla GHP in the eyes of the Section 111 rules.

 

42 CFR §411.101:

https://www.govinfo.gov/content/pkg/CFR-2010-title42-vol2/pdf/CFR-2010-title42-vol2-sec411-101.pdf

Group health plan (GHP) means any arrangement made by one or more employers or employee organizations to provide health care directly or through other methods such as insurance or reimbursement, to current or former employees, the employer, others associated or formerly associated with the employer in a business relationship, or their families, that—

(1) Is of, or contributed to by, one or more employers or employee organizations.

(2) If it involves more than one employer or employee organization, provides for common administration.

(3) Provides substantially the same benefits or the same benefit options to all those enrolled under the arrangement.

The term includes self-insured plans, plans of governmental entities (Federal, State and local), and employee organization plans; that is, union plans, employee health and welfare funds or other employee organization plans. The term also includes employee-pay-all plans, which are plans under the auspices of one or more employers or employee organizations but which receive no financial contributions from them. The term does not include a plan that is unavailable to employees; for example, a plan only for self-employed persons.

 

https://www.cms.gov/files/document/mmsea-section-111-ghp-user-guide-version-75-july-2025.pdf

A Health Reimbursement Arrangement (HRA) is a GHP arrangement and is subject to the MSP reporting provisions. HRAs include Individual Coverage HRAs (ICHRAs). ICHRAs can be used to pay both premiums and medical claims. All HRAs, including ICHRAs, Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs), and excepted benefit HRAs, are subject to the applicable MSP provisions regardless of whether or not they have an end-of-year carry-over or roll-over feature. An HRA is funded 100% by an employer.

[rocknrolls2]

Thank you, Brian, for your thorough and detailed answer. However, while I agree that the personal benefit account should be considered a group health plan for ERISA purposes, what causes me to lean on the opposite side of this fence are the following: (1) the account can pay other types of benefits including severance and supplemental unemployment, and, in some cases, disability benefits; and (2) the personal benefit account is not a primary payor. Do these facts, in any way, change your conclusion?

 

[Brian Gilmore]

13 minutes ago, rocknrolls2 said:

(1) the account can pay other types of benefits including severance and supplemental unemployment, and, in some cases, disability benefits;

Agreed, but the account also reimburses health expenses.  You can't avoid GHP laws simply by tacking on non-medical expenses to the arrangement.

14 minutes ago, rocknrolls2 said:

(2) the personal benefit account is not a primary payor. Do these facts, in any way, change your conclusion?

Neither is an HRA (in most situations), and that is still subject to Section 111 reporting.

I hear you it may not make a whole lot of sense--but I'm not seeing any carve out here.