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Benefits in the News > By Subject >

Health reimbursement accounts (HRAs)

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Small Group Savior? Another Look at QSEHRAs
"Employers still have to comply with a variety of notice and reporting requirements that carry high excise taxes for non-compliance. Reimbursements have to be substantiated and verified before payment is made or the QSEHRA risks losing the tax-advantage status for all participants -- even if due to administrative error." (Frenkel Benefits)
Can a Company's Owners Participate in Its HRA?
"The answer depends on several factors, including how your company is organized and the amount of the company owned by each working owner.... Ineligible owners include partners, sole proprietors, and more-than-2% shareholders in a Subchapter S corporation. Stock ownership by employees of a Subchapter C corporation does not preclude their tax-favored HRA participation." (Thomson Reuters / EBIA)
[Guidance Overview] Summary of Qualified Small Employer Health Reimbursement Arrangements (QSEHRAS)
"The QSEHRA provides a permitted benefit to eligible employees -- the maximum amount of the payment or reimbursement available to each employee. The permitted benefit cannot exceed statutory dollar limits that are indexed for inflation for years after 2016.... Unused permitted benefits from one year can be carried-over to the next year ... [If] the carryover amount from a prior year plus the current year's permitted benefit exceeds the current year's statutory limit, some portion of the carryover is forfeited." (Ice Miller LLP)
2018 Healthcare Trends
"The constant demand for the latest and greatest in technology could have the greatest impact on healthcare in 2018. Innovations in digital technology are spurring a rise in data management and improving the delivery of medical care." (DataPath)
[Guidance Overview] IRS Provides Guidance on Qualified Small Employer Health Reimbursement Arrangements
"According to [IRS Notice 2017-67], a separate benefit up to the maximum permitted benefit must be provided to each eligible employee, regardless of whether employees are covered under an individual health policy or a family policy. Therefore, spouses who work for the same employer and who are covered under a family policy must both receive the full family benefit coverage.... However, eligible employees may not be reimbursed for duplicate costs, so the total premium reimbursement for Employees A and B may not exceed the $10,000 annual premium for their family health insurance policy." (von Briesen & Roper, s.c.)
Small Employers Can Help Employees with Individual Health Insurance
"[A] qualified small employer health reimbursement arrangement may reimburse eligible employees for the cost of obtaining their own health insurance and certain other medical expenses. A health reimbursement arrangement is funded entirely by the employer up to $5,050 for an employee with self-only coverage and $10,250 for an employee with family coverage. These are 2018 limits." (Inside Business)
QSEHRA Revives Opportunity for Small Business HRAs
"The primary appeal of the QSEHRA for most small business owners is that it's a way to provide employee 'health benefits', without taking on the full burden -- and cost uncertainties -- of offering group health insurance. Instead, employers can control their costs by explicitly setting a monthly dollar amount that becomes available to employees for reimbursement, avoiding payroll taxes on any dollars actually spent, and keeping any unused QSEHRA dollars that aren't actually claimed by employees as a reimbursement ... QSEHRA benefits are not available for most small business owners themselves, though with the above-the-line deduction for health insurance premiums for small business owners, the QSEHRA would often be a moot point anyway." (Nerd's Eye View)
[Guidance Overview] IRS Offers Comprehensive Guidance on Small Employer HRAs
"The IRS's new guidance -- 79 questions and answers in Notice 2017-67 -- applies to QSEHRA plan years beginning on or after Nov. 20, 2017. The guidance answers questions such as: [1] when is an employer eligible to sponsor a QSEHRA; [2] how does an employer identify employees who are eligible to receive reimbursement; [3] how must an employer substantiate claims; and [4] how should an employer report QSEHRA coverage on federal W-2 forms?" (Lockton)
[Guidance Overview] QSEHRAs Provided by '21st Century Cures Act' May Not Be a Total Cure
"Employers desiring to offer a QSEHRA must be aware that these arrangements are different in many significant respects from the health reimbursement arrangements first recognized under IRS Notice 2002-45 (HRA) and QSEHRAs also carry many additional requirements, such as the requirement that the individual must certify that they have MEC before each expense is reimbursed in order for the expense to be eligible and excluded from the individual's income and to not disqualify the QSEHRA. Disqualifying a QSEHRA means loss of the income tax exclusion for the individual, and depending upon the violation it may mean loss of being exempt from the group health plan definition and would trigger application of all provisions applicable to group health plans under the Code, COBRA, the ACA requirements(including the requirement that HRAs be integrated with a group health plan) and under the Medicare secondary payer statute." (Winstead PC)
[Guidance Overview] IRS Issues Comprehensive Guidance on QSEHRAs
"[IRS Notice 2017-67] includes 79 FAQs and addresses a range of issues.... [Highlights include:] [1] Premiums for coverage under the group health plan of a spouse's employer are reimbursable, but reimbursements will be taxable to the extent premiums were paid on a pre-tax basis (FAQ-48). [2] Expenses for over-the-counter drugs purchased without a prescription are also reimbursable but taxable (FAQ-54). [3] QSEHRA balances can be made available ratably over the year and reimbursements limited to the amount available (FAQ-50). [4] QSEHRAs can also have a run-out period (FAQ-53)." (Thomson Reuters / EBIA)
[Official Guidance] Text of IRS Notice 2017-67: Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs), Interaction with Health Savings Accounts (HSAs) (PDF)
59 pages; 79 Q&As. "This notice provides guidance on the requirements for providing a qualified small employer health reimbursement arrangement (QSEHRA) under section 9831(d) of the Internal Revenue Code, the tax consequences of the arrangement, and the requirements for providing written notice of the arrangement to eligible employees.... Executive Order 13813 ... directed the Secretaries of the Treasury, Labor, and Health and Human Services to consider revising guidance, to the extent permitted by law and supported by sound policy, to increase the usability of health reimbursement arrangements (HRAs), expand employers' ability to offer HRAs to their employees, and to allow HRAs to be used in conjunction with non-group coverage. The guidance provided in this notice addresses each of those objectives. The Treasury Department and the [IRS] anticipate that the Departments will issue additional guidance in the future in response to Executive Order 13813....

"Under section 223, individuals who have high deductible health plan (HDHP) coverage and no other disqualifying health coverage may contribute to an HSA. Individuals who are covered by permitted insurance (defined under section 223(c)(3)) or certain disregarded coverage (defined under section 223(c)(1)(B)), in addition to HDHP coverage, remain eligible to contribute to an HSA....

"[Q 76:] Does an individual fail to be an eligible individual under section 223 because the individual is provided a QSEHRA that, by its terms, may reimburse only premiums? [Answer:] No. [Q 77:] Does an individual fail to be an eligible individual under section 223 because the individual is provided a QSEHRA that, by its terms, may only reimburse expenses that qualify as permitted insurance or disregarded coverage under section 223(c), in addition to reimbursing premiums for health insurance policies? [Answer:] No." (Internal Revenue Service [IRS])

Health Reimbursement Accounts in Limbo After Subsidies Cut
"Critics of Trump's move to stop giving subsidies to certain populations say the move will tank the individual market. That means employers that might want to give their workers tax-free money in an HRA to purchase their own coverage might not feel as comfortable sending employees to an unstable market." (Bloomberg BNA)
Health Care Order May Open Options for Employers
"President Donald Trump's new executive order on health care could create new options for employers, including allowing more of them to fund accounts that workers can use to buy insurance. But companies are unlikely to have any new rules to act on this year -- and when they do, it is unclear whether many will offer these tax-favored accounts, known as Health Reimbursement Arrangements, or HRAs. Instead, companies will be in a holding pattern until the Trump administration draws up final rules for HRAs in the coming months." (The Wall Street Journal; subscription may be required)
What If Employees Could Buy Coverage with Tax-Free HRA Contributions?
"Only about a third of employers -- of any size -- said they would not consider this option.... Would they be allowed to contribute enough so that employees could obtain coverage of comparable value? And would the individual market offer coverage that employees would want at prices they could afford? The majority of respondents to the survey said they would need to know the answers to these question before they could consider using an HRA for this purpose." (Mercer)
Can Employees Pay for Cord Blood Storage with an HRA, FSA or HSA?
"[If] the storage is merely precautionary, then the storage wouldn't be a qualified medical expense. If there's a current need (for example, the baby or a sibling or parent is actually sick and could benefit from the cord blood in the short term) then there's an argument to count the cord blood storage as a qualified medical expense and allow reimbursement of the costs through an HRA, FSA or HSA." (Mintz Levin)
Can HSA Contributions Continue After an Employee Ceases to Be HSA-Eligible?
"HSA contributions for a partial year of HSA eligibility ... can be made at any time from the first day of the year until the individual's federal tax return due date, without extensions, for that year.... Thus, your cafeteria plan could be amended to allow participating employees to continue making HSA contributions through the end of the year in which they lose (or appear to lose) their HSA eligibility, or until they reach their contribution limit for the partial year of eligibility, whichever happens first." (Thomson Reuters / EBIA)
Can I Have an HRA and HSA at the Same Time?
"HRA plan types that are compatible with an HSA: [1] Limited purpose HRA ... [2] Post-deductible HRA ... [3] Retirement HRA ... [4] Suspended HRA." (DataPath)
HRA Plan Primer: Facts About Qualified Expenses, Taxes and More
"If your employer offers an HRA plan, here are some important things to know about the accounts: HRA plan specifics can vary widely.... HRAs are not portable.... HRA plans may restrict which expenses are covered.... Most HRAs cannot reimburse for insurance premiums.... Once reimbursed by an HRA, expenses are no longer tax-deductible.... HRA reimbursements are not taxable under most plan designs." (DataPath)
Consumer Engagement in Health Care (PDF)
28 pages. "Fourteen percent of privately insured adults were enrolled in a consumer-driven health plan (CDHP) -- a health plan associated with [an HSA or HRA]; 14 percent also were enrolled in a high-deductible health plan (HDHP) ... not linked to an HSA or HRA; and 73 percent were enrolled in more traditional coverage.... More than half (56 percent) of CDHP enrollees opened an HSA, taking advantage of growing employer contributions.... Adults in a CDHP and those in an HDHP were more likely than those in a traditional plan to exhibit a number of cost-conscious behaviors." (Employee Benefit Research Institute [EBRI])
FSA, HRA, and HSA Comparison Chart (PDF)
Chart summarizes 26 aspects of the programs, including eligibility, portability, discrimination rules, funding requirements, maximum contribution levels, and balance carry-overs. (Marsh Consulting Group)
How Health Savings Accounts Measure Up
"An HSA is offered in 24.6 percent of plans, a 21.8 percent increase from five years ago. HSA enrollment is at 17 percent, a 25.9 percent increase from 2015, and nearly a 140 percent increase from five years ago. The average employer contribution to an HSA is $474 for a single employee (down 3.5 percent from 2015 and 17.6 percent from five years ago) and $801 for a family (down 9.2 percent from last year and 13.7 percent from five years ago)." (United Benefit Advisors)
Health Reimbursement Arrangements: What You Need to Know About Qualified Expenses, Taxes, and More
"[C]ertain types of HRA plan designs can trigger a shift from non-taxable to taxable income. These include plans that: [1] Comply with the 'medical expenses only' requirement, but reimburse employees for some or all of their unused money at the end of the year; [2] Provide a death benefit to employees' dependents from unused funds, and allow the funds to be used for non-medical expenses; [3] Allow unused account dollars to be applied to other company benefits, such as a 401(k) contribution." (DataPath)
[Guidance Overview] QSEHRA: 21st Century Cures Act Creates a New Health Care Plan Option for Small Employers
"QSEHRA funds may be used for many qualifying medical expenses, not just premiums.... The employer must give written notice of the benefit to employees no later than 90 days prior to the start of the plan year.... As of [March 31], the notice requirement had been suspended by the IRS until further guidance on the contents of the notice is issued. See IRS Notice 2017-20." (Mintz Levin)
[Guidance Overview] 21st Century Cures Act Overrules IRS Guidance on HRAs, Enhances Enforcement of Mental Health Parity Act
"[The 21st Century Cures Act (CCA) authorizes] employers that don't qualify as applicable large employers, i.e., employers with less than 50 full-time employees and full-time equivalents, to maintain certain reimbursement arrangements without incurring the $100 per day per employee penalty for failing to comply with the ACA.... The CCA directs the Departments of [HHS], Labor, and Treasury to issue a compliance guidance document with the goal of improving compliance with the MHPAEA.... Within six months after the enactment of the CCA, the Secretary of [HHS] must convene a public meeting that includes the Departments of Health and Human Services, Treasury, Labor and Justice, as well as representatives from the States, to develop an action plan for MHPAEA compliance." (Thompson Coburn)
[Guidance Overview] New Employer Healthcare Plan: Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
"Only employers with fewer than 50 full-time equivalent employees can offer this benefit. Further, it cannot offer group health plans to any employees ... [A]ny eligible employees must be notified of the arrangements in writing at least 90 days before the first day they will be eligible to participate. For the current year, the IRS is giving employers who implement QSEHRAs an extension until March 13, 2017 to provide a notice." (Fisher Phillips)
[Guidance Overview] IRS Extends Deadline for Providing Small-Employer QSEHRA Notices
"[C]onceding that many employers could find it hard to comply with this notification requirement in the absence of further guidance, Notice 2017-20 further extends this transition relief. The new notification deadline is 90 days after the IRS issues guidance on the notice's content. There is therefore still ample time for a small employer to adopt a QSEHRA for 2017." (Spencer Fane)
[Official Guidance] Text of IRS Notice 2017-20: Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (PDF)
"A [qualified small employer health reimbursement arrangement (QSEHRA)] is an arrangement described in section 9831(d), which was added to the Code by the 21st Century Cures Act ... Under that section, an eligible employer (generally an employer with fewer than 50 full-time employees, including full-time equivalent employees, that does not offer a group health plan to any of its employees) may provide a QSEHRA to its eligible employees. Under a QSEHRA, after an eligible employee provides proof of coverage, payments or reimbursements may be made to that eligible employee for expenses for medical care (as defined in section 213(d) and including expenses for premiums for individual health insurance policies) incurred by the eligible employee or the eligible employee's family members, provided certain requirements are satisfied.... Section 9831(d)(4) generally requires an eligible employer to furnish a written notice to its eligible employees ... Section 6652(o), which was also added to the Code by the Cures Act, imposes a penalty for failing to timely furnish eligible employees with the required written QSEHRA notice.... [An] eligible employer that provides a QSEHRA to its eligible employees for a year beginning in 2017 is not required to furnish the initial written notice to those employees until after further guidance has been issued by Treasury and the IRS. That further guidance will specify a deadline for providing the initial written notice that is no earlier than 90 days following the issuance of that guidance. No section 6652(o) penalties will be imposed for failure to provide the initial written notice before the extended deadline specified in that guidance. Employers that furnish the QSEHRA notice to their eligible employees before further guidance is issued may rely upon a reasonable good faith interpretation of the statute to determine the contents of the notice." (Internal Revenue Service [IRS])
[Opinion] ECFC Letter Requesting Guidance for Qualified Small Employer Health Reimbursement Arrangements Under the 21st Century Cures Act (PDF)
"[G]uidance is needed for employers to understand whether they are currently offering a disqualifying group health plan.... We would like confirmation that an employer could, in fact, offer a QSEHRA that limits reimbursements to premiums for health insurance.... [A] QSHRA that reimburses at the maximum for individual and family coverage should be considered as providing coverage under the same terms for all eligible employees regardless of the difference in price between a health policy with single coverage and one with family coverage.... An employer's involvement with after-tax payroll deduction for any excess cost of a QSEHRA funded policy (i.e., amounts in excess of the statutory limits) should not cause the employer to become ineligible to offer a QSEHRA ... It would be helpful ... for the Agencies to provide a model notice that will satisfy the requirements for the notice." (Employers Council on Flexible Compensation [ECFC])
Healthcare Benefits in 2017: What Employers Have to Say
"2016 marked a milestone for healthcare consumerism, with the amount of organizations offering HDHPs jumping from 28% four years ago to 39% in last year's survey to 53% in this year's survey.... With this rise in HDHPs came an increase in the number of employees being enrolled in a Health Savings Account [HSA], Healthcare Reimbursement Arrangement [HRA], or Flexible Spending Account [FSA] ... 51.5% of respondents' employees are enrolled in one or more of these plans/arrangements." (Healthcare Trends Institute)
[Official Guidance] Text of IRS Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans, for Use in Preparing 2016 Returns (PDF)
22 pages; Feb. 10, 2017. "An HSA may receive contributions from an eligible individual or any other person, including an employer or a family member, on behalf of an eligible individual.... An Archer MSA may receive contributions from an eligible individual and his or her employer, but not both in the same year... A Medicare Advantage MSA is an Archer MSA designated by Medicare to be used solely to pay the qualified medical expenses of the account holder who is enrolled in Medicare.... A health FSA may receive contributions from an eligible individual. Employers may also contribute.... An HRA must receive contributions from the employer only. Employees may not contribute." (Internal Revenue Service [IRS])
[Guidance Overview] Qualified Small Employer HRAs Face Steep Compliance Path
"The compliance path for QSE HRAs is steep enough that they may not be adopted by a significant number of eligible employers.... [C]ompliance hurdles that small employers will face: [1] Requirement that no group health plan be maintained.... [2] Confusion over impact on premium tax credits.... [3] Annual notice requirement.... [4] Annual tax reporting duties.... [5] Lack of financial incentive for benefit advisers." (E is for ERISA)
[Guidance Overview] New HRAs for Small Employers: Some Questions and Answers
"What employers can offer a Small Employer HRA? ... What expenses can be reimbursed by a Small Employer HRA? ... Are there limits on reimbursement? ... Do employees have to have health insurance coverage? ... Are Small Employer HRAs subject to [ERISA]? ... Are Small Employer HRAs subject to COBRA continuation coverage? ... Do employers have to provide any special notices to employees?" (Greensfelder)
Comparison Chart: Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and Health Reimbursement Accounts (HRAs) (PDF)
Chart addresses contribution limits, portability, eligible expenses, substantiation, and other requirements. (Acclaris)
[Guidance Overview] Integration Rules for Family HRAs Addressed in ACA Guidance
"In their latest FAQs, the Departments address how their prior guidance applies to family HRAs (that is, an HRA that reimburses medical expenses of an employee's spouse and/or dependents) when: An employee is enrolled in self-only coverage. The employee's spouse and dependents are enrolled in a non-HRA group health plan sponsored by the spouse's employer." (Practical Law Company)
Answers to Some Questions about QSEHRAs
"Which employers can offer QSEHRAs? ... What benefits does a QSEHRA cover? ... What are the health plan requirements for employees? ... Can employees be excluded? ... Is a QSEHRA subject to COBRA or ERISA rules? ... Are there administrative requirements for QSEHRA?" (DataPath)
Obamacare Repeal Has Begun For Small Firms
"The advantage of HRAs and similar funding vehicles is that they allow employers to give money directly to employees, which they can spend on medical care. This gets around health insurers' bureaucracies, which add unnecessary administrative costs.... Like the HRA itself, the new reform is not perfect. For employees who are eligible for tax credits in Obamacare's exchanges, there is a claw-back of those tax credits if their employers fund HRAs for them. It is hard to imagine a small business wanting to substitute its own money for federal taxpayers' in the exchanges." (National Center for Policy Analysis Health Policy Blog)
[Guidance Overview] 21st Century Cures Act: Qualified Small Employer HRAs
"The exception for QSE HRAs is only available to small employers. ALEs must still treat HRAs that provide medical benefits as group health plans. In addition, the exception does not apply to any arrangement (such as a cafeteria plan) which is funded by employee contributions or salary reductions." (Compliance Dashboard)
21st Century Cures Act: Welcome Versatility in the Small Group Market
"For employers looking for a quick fix to avoid the responsibilities of offering group health insurance, the new law is not a complete solution. Rather, employers using the new HRA rules are required to provide an annual notice that defines which employees are eligible and discloses any available HRA funds to the health insurance exchange. And employers must include the HRA value on the employee's W-2 and provide a 1095-B to each employee (and disclose the 1095-B information to the IRS)." (Frenkel Benefits)
[Guidance Overview] Qualified Small Employer Health Reimbursement Arrangements Available for Small Employers (PDF)
"A small employer may sponsor a QSEHRA.... The determination ... is made on a controlled group basis... [An] eligible employer is generally one that employs fewer than 50 full-time employees (including full-time equivalent employees) in the previous year.... The small employer may not offer a group health plan to any of its employees (e.g., medical, dental, vision plans, etc.).... [T]he controlled group rules apply in determining whether a group health plan is offered to any employee." (Trucker Huss)
[Guidance Overview] Agency FAQs Address Rules for QSEHRAs, Coverage of Preventive Services
"[T]he Departments indicate that: QSEHRAs, because they are statutorily excluded from the group health plan definition, are not subject to the group market reform requirements. The Departments' prior guidance nonetheless continues to apply to EPPs and HRAs that do not qualify as QSEHRAs.... [P]reventive services must be covered consistent with the updated guidelines for plan years beginning on or after December 20, 2017. Until the new guidelines apply, plans must provide preventive services coverage consistent with the previous HRSA guidelines and ACA preventive services rules for any items or services that continue to be recommended." (Practical Law Company)
[Official Guidance] Text of Agency FAQs on ACA Implementation, Set 35: Special Enrollment for Group Health Plans, Coverage of Preventive Services, and QSEHRAs (PDF)
"Special Enrollment for Group Health Plan ... [E]mployees and their dependents are eligible for special enrollment in a group health plan if they are otherwise eligible to enroll in the plan, and at the time coverage under the plan was previously offered, they had other group health plan or health insurance coverage ... for which they have lost eligibility. Accordingly, if an individual loses eligibility for coverage in the individual market, including coverage purchased through a Marketplace ... that individual is entitled to special enrollment in group health plan coverage for which he or she is otherwise eligible. These individuals will be eligible for special enrollment in the group health plan coverage regardless of whether they may enroll in other individual market coverage, through or outside of a Marketplace....

"Coverage of Preventive Services ... Women's preventive services are required to be covered without cost sharing in accordance with the updated guidelines for plan years ... beginning on or after December 20, 2017. Until the new guidelines become applicable, non-grandfathered group health plans and health insurance issuers are required to provide coverage without cost sharing consistent with the previous HRSA guidelines and PHS Act section 2713 for any items or services that continue to be recommended....

"Qualified Small Employer Health Reimbursement Arrangements [QSEHRAs] ... Q&A 2 of Notice 2015-17 clarifies the treatment of certain S corporation healthcare arrangements for 2-percent shareholder employees, generally providing that, until additional guidance provides otherwise, taxpayers may continue to rely on Notice 2008-1 for all federal income and employment tax treatment of such arrangements, and that such arrangements will not be treated as failing to satisfy the market reforms. As additional guidance with respect to these arrangements has not been issued, the guidance under Q&A 2 of Notice 2015-17 continues to apply.... [T]he Departments' prior regulations and guidance continue to apply with respect to EPPs and HRAs that do not qualify as QSEHRAs, including such arrangements offered by employers that are not eligible employers as defined under the Cures Act. An employer that is considered an applicable large employer as defined in Code section 4980H(c)(2) is not permitted to offer a QSEHRA." (U.S. Department of Health and Human Services [HHS]; U.S. Department of Labor [DOL] and U.S. Treasury Department)

[Guidance Overview] Back from the Dead: Premium Reimbursement Arrangements for Small Employers Resurrected by 21st Century Cures Act
"The Cures Act allows small employers to set up HRAs in the form of [qualified small employer health reimbursement arrangement (QSEHRAs)].... [E]mployer payments through the QSEHRA are deductible and reimbursements from the QSEHRA are excludible from employees' income.... The new QSEHRAs may be a great option for small employers that have struggled to provide affordable health coverage options for their employees. However, unlike the pre-ACA HRAs, QSEHRAs are subject to many new requirements." (Proskauer's ERISA Practice Center)
The 21st Century Cures Act and What You Need to Know
"[This] infographic highlights the important points regarding the 21st Century Cures Act and standalone HRAs for insurance premium reimbursements. The Cures Act affects millions of small businesses and their employees." (DataPath)
[Guidance Overview] Holiday Present for Small Employers: HRAs Can Be Used for Reimbursement of Health Insurance Premiums
"[T]he arrangement must: [1] Be provided on the same terms to all eligible employees of the eligible employer; [2] Be funded solely by an eligible employer (i.e., no salary reduction contributions); [3] Mandate provision of 'proof of coverage' before the payment or reimbursement of benefits; [4] Limit the amount of payments and reimbursements for any year to no more than $4,950 ($10,000 in the case of an arrangement that covers family members of the employee); and [5] No later than 90 days before the beginning of a year in which the arrangement will be adopted, issue a specific written notice to all eligible employees." (Michael Best & Friedrich LLP)
[Guidance Overview] Small Employers May Resume Offering Premium Reimbursement HRAs to Employees
"[C]ertain small employers may resume offering their employees [Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs)], and employees may use funds in such arrangements to purchase individual health insurance.... General requirements.... Employer eligibility requirements.... Minimum essential coverage requirement.... Notice requirements." (The Wagner Law Group)
[Guidance Overview] Small Businesses Can Now Reimburse Employee Medical Expenses
"Notice 2015-17 granted excise tax relief for certain other arrangements offered by both large and small employers that reimburse: [1] Individual health insurance policies for more than 2 percent shareholders of S corporations; [2] Premiums for Medicare and Medicare supplemental policies; [and] [3] Medical expenses for employees covered by TRICARE.... [T]he new law does not specifically address the status of these types of reimbursement arrangements and is unclear if they can be continued after 2016 by large employers. In addition, it is unclear whether small employers can continue the above arrangements for select employees rather than establishing a QSEHRA." (RSM US)
[Guidance Overview] New Law Permits Stand-Alone HRAs for Small Employers
"Small employers who do not wish to offer their own health plan to employees can now provide employees a pre-tax subsidy of individual health insurance premiums by establishing a Qualified Small Employer Health Reimbursement Arrangement [QSEHRA] beginning on or after January 1, 2017.... These programs will not be subject to the COBRA notice requirements or the extension of coverage after the employee's coverage would end." (Stinson Leonard Street)
[Guidance Overview] New Law Permits Individual Premium Reimbursement HRAs for Small Employers
"[The 21st Century Cures Act] offers small employers the opportunity to reevaluate this benefits approach. However, it does not give employers free rein to reimburse all manner of individual health insurance premiums. Numerous limitations appear in the law that did not apply prior to 2013[.]" (Hill, Chesson & Woody)
[Guidance Overview] Mental Health Parity, Eating Disorders, HIPAA, and HRAs for Small Employers Addressed in 21st Century Cures Act
"The legislation [signed into law by President Obama on December 13] includes several provisions intended to simplify disclosure tools for information provided to participants, beneficiaries, and others regarding mental health parity compliance.... [A] plan or insurer that provides coverage for eating disorder benefits (including residential treatment) must provide these benefits consistent with the parity requirements for mental health and substance use disorder benefits ... The legislation instructs HHS to ensure availability of resources regarding appropriate uses and disclosures of PHI." (Practical Law Company)
[Guidance Overview] Small Employer Standalone HRA Allowed by New Law
"An employer offering a Qualified HRA must provide each eligible employee a written notice at least 90 days before the beginning of the year including: [1] The amount of the permitted benefit under the Qualified HRA for the year; [2] A statement that if the employee is applying for advance payment of the premium tax credit for health insurance on the Marketplace, the employee must inform the Marketplace of the amount of the permitted benefit under the Qualified HRA; [3] A statement that if the employee is not covered under minimum essential coverage for any month, the employee may be subject to a tax under Code Section 5000A and reimbursements under the Qualified HRA may be taxable income. Under a transition rule, for 2017, the notice must be provided within 90 days after the date of enactment of the new law." (Dickinson Wright PLLC)
[Guidance Overview] 21st Century Cures Act Would Give Small Employers Greater Use of HRAs
"[T]he IRS had prohibited stand-alone HRAs.... However, the Act would save [qualified small employer health reimbursement arrangement (QSEHRAs)] from that IRS position by removing these arrangements from the definition of 'group health plans.' The Act also would amend the definition of group health plan in ERISA Sections 607 and 733 to exclude these arrangements, which includes an exclusion from the requirements under COBRA." (Jackson Lewis P.C.)
Congress Passes Legislation Allowing Premium-Reimbursement HRAs Under the ACA
"[T]he bill will allow certain small businesses to use health reimbursement arrangements (HRAs) without incurring penalties under the [ACA].... Under the act, a qualified small employer HRA must be funded solely by an eligible employer, and there can be no salary reduction contributions under the arrangement.... [T]he amount of payments and reimbursements under the plan for any year cannot exceed $4,950 ($10,000 in the case of an arrangement that also provides for payments or reimbursements for family members of the employee)." (Journal of Accountancy)
House Passes 21st Century Cures Act with HRA Provisions
"This bill contains a provision ... [which] would establish new small employer health reimbursement arrangements [HRAs] so that eligible small employers can offer [an HRA] funded solely by the employer that would reimburse employees for qualified medical expenses including health insurance premiums." (Employers Council on Flexible Compensation [ECFC])
[Guidance Overview] New ACA Rules for HRAs, Flex Credits and Opt-Out Payments
"Although the rules in Notice 2015-87 generally apply for plan years beginning on or after December 16, 2015, under transition relief, many of the new rules will take effect for plan years beginning on or after January 1, 2017. Final regulations regarding opt-out payments will likely be issued later this year ... In planning for next year, employers and plan sponsors that include any of these features in their health plans should review plan documents and operations for compliance with the new requirements, several of which are explained in this article." (Hanson Bridgett LLP)
Using 401(h) Assets to Pay Retiree HRA Claims
"This type of arrangement must comply with the requirements for both HRAs and 401(h) accounts. The interaction of these two sets of rules creates a number of technical uncertainties, which were favorably resolved in [PLR 201611003]. Unfortunately, the IRS did not provide a detailed rationale for its conclusion." (Willis Towers Watson)
[Opinion] Small Business Health Care Bill Raises Questions
"A bipartisan bill that the House Ways and Means Committee will consider today would let small employers use a health reimbursement arrangement (HRA) ... to help their workers buy individual-market coverage, rather than offer health insurance directly.... Among the unanswered questions: How will small employers respond? ... What will happen to health insurance market risk pools? ... How will small business HRAs affect workers' coverage?" (Center on Budget and Policy Priorities)
[Guidance Overview] Health Reimbursement Arrangements: Death by a Thousand Cuts (PDF)
"[T]o qualify as integrated, an HRA must meet the following four requirements: [1] The employer offers other group coverage to the employee ... [2] The employee covered by the HRA is actually enrolled in group coverage in addition to the HRA ... [3] The HRA's reimbursements are limited to ... co-payments, coinsurance, deductibles and premiums under the other group coverage, [and/or] medical care that does not constitute an 'essential health benefit' under the ACA ... [4] The HRA permits a covered employee or former employee to choose, at least annually, to permanently opt out of the HRA." (Lockton)
HSAs and HRAs: How They're Doing (PDF)
"The number of plans offering an HSA or an HRA is decreasing significantly. In 2015, 23.9% of all plans offered an HSA or an HRA, a 29% decrease from 2014.... Overall enrollment in HRA plans has remained flat at 8.7% for the last three years. The average employer contribution for an HRA was $1,767 for a single employee and $3,472 for a family, up slightly from 2014.... California offers the best HRA plans for singles and families; large employers and Southeast businesses offer the worst HRA plans." (United Benefit Advisors)
[Guidance Overview] IRS Notice 2015-87 Provides Additional Guidance Issued on Health Reimbursement Arrangements (PDF)
"Plan sponsors should review all health premium or cost-sharing reimbursement plan designs during 2016. HRAs cannot reimburse individual market premiums even during the spend-down phase of an HRA. Effective in 2017, HRAs cannot reimburse family members' expenses if these individuals are not also enrolled in non-HRA group coverage." (Segal Consulting)
[Guidance Overview] IRS Private Letter Ruling Addresses Elections to Contribute Unused Vacation to Retiree HRA or 401(k) Plan
"Prior IRS rulings have looked favorably on the automatic and mandatory contribution of unused vacation into another plan -- and a recent ruling allowed employees to choose which of two retiree medical plans would get the contribution ... However, the choice between an HRA and a 401(k) plan is a new twist.... The nondiscrimination rules could be an obstacle in other situations and for other plans (including HRAs), depending on the design." (Thomson Reuters / EBIA)

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