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Health reimbursement accounts (HRAs)

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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)
Five Important Highlights from the Last IRS Notice of 2015
"[1] The IRS has reaffirmed that employers don't have a way to pay for individual medical plans on behalf of employees using tax-advantaged dollars.... [2] Dollars offered through a health reimbursement arrangement (HRA) are disallowed from the medical plan's affordability calculations if the funds can also be allocated to non-medical plans ... [3] Employers that offer a cash incentive to employees who waive health coverage ... [may be required to add] the incentive ... to the employee cost when figuring affordability.... [4] Employees can apply now for tax credits in the public exchange ... even though the employer is held harmless from the employer mandate excise tax until final regulations are published.... [5] Employers with HRA plans that are integrated with their medical plan must restrict payments for dependents' health expenses only to those covered by the medical plan." (bswift)
[Guidance Overview] Text of IRS Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans (PDF)
21 pages, dated Jan. 13, 2016. "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 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])
HRA Access for Spouses and Dependents: A New Wrinkle for Form 1095-C
"If the HRA can be used to pay for copayments and deductibles incurred by the employee's spouse and dependents, should the spouse and dependents be listed in Part III as covered individuals (even though they are 'covered' only under the HRA)? ... Can an HRA satisfy the market reform requirements of the [ACA] if it reimburses copayments and deductibles incurred by the employee's spouse and dependents despite the employee's enrollment for self-only coverage under the group health plan of which the HRA is a component part? Both of these questions are important because they may increase (or lighten) your reporting burdens or reveal a latent compliance problem with your HRA." (Ogletree Deakins)
[Guidance Overview] IRS Confirms That Opt-Out or Cash-In-Lieu Payments Must Be Added to Employee Contributions in Determining ACA Affordability
"In the IRS's judgment, an opt-out payment has the effect of increasing an employee's contribution for health coverage beyond the amount of any salary reduction contribution. Foregoing that opt-out, concludes the IRS [in Notice 2015-87], compels an employer to add the cash-in-lieu amount to the employee contribution in calculating PPACA affordability.... [An] employer may continue opt-out payments without having to include those opt-out amounts in the employee contributions so long as that employer had a published opt-out policy in place prior to December 16, 2015." (Benefit Revolution)
[Guidance Overview] IRS Issues New HRA Integration Rules
"Notice 2015-87 reaffirms that HRAs limited to retirees may reimburse individual market insurance premiums (including Medicare supplement plans) and other medical-related costs.... Unless the retiree-only exception applies, unused amounts in an HRA cannot be used to reimburse premiums paid by former employees for individual market coverage even if the amounts were originally earned in the HRA when the HRA was properly integrated with a group health plan.... An HRA that reimburses medical expenses for an employee and the employee's spouse and dependents cannot be integrated with self-only group health plan coverage provided by the employer. However, the IRS will not enforce this requirement until 2017." (Proskauer's ERISA Practice Center)
[Official Guidance] Text of IRS Notice 2015-87: Application of ACA Market Reform Provisions to Employer-Provided Health Coverage, and Certain Other Provisions (PDF)
31 pages. "[T]his notice provides guidance on the application of the market reforms that apply to group health plans under the [ACA] to various types of employer health care arrangements [including] [1] health reimbursement arrangements (HRAs), including HRAs integrated with a group health plan, and similar employer-funded health care arrangements, and [2] group health plans under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy ... or an arrangement under which the employer uses its funds to directly pay the premium for an individual health insurance policy covering the employee ...

"[T]his notice clarifies certain aspects of the employer shared responsibility provisions of Section 4980H, including the identification of employee contributions when employers offer HRAs, flex credits, opt-out payments, or fringe benefit payments required under the McNamara-O'Hara Service Contract Act or other similar laws, the application of the adjusted 9.5 percent affordability threshold under Section 36B(c)(2)(i)(II) to the safe harbor provisions under Section 4980H, and the employer status of certain entities for Section 4980H purposes....

"[T]his notice clarifies certain aspects of the application to government entities of Section 4980H, the information reporting provisions for applicable large employers under Section 6056, and application of the rules for health savings accounts (HSAs) to persons eligible for benefits administered by the Department of Veterans Affairs (VA)....

"[T]his notice clarifies the application of the COBRA continuation coverage rules to unused amounts in a health flexible spending arrangement (health FSA) carried over and available in later years ... and conditions that may be put on the use of carryover amounts....

"[T]his notice addresses relief from penalties under Sections 6721 and 6722 that has been provided for employers that make a good faith effort to comply with the requirements under Section 6056 to report information about offers made in calendar year 2015."

(Internal Revenue Service [IRS])
[Guidance Overview] IRS Issues Guidance for Integrated HRAs
"In a recent Chief Counsel Advice (CCA 201547006), the IRS has provided guidance for employers wishing to offer health reimbursement arrangements (HRAs) that both [1] provide reimbursements on a tax-free basis, and [2] satisfy the 'market reform' requirements of the Affordable Care Act. In particular, this CCA focuses on HRAs (and similar 'employer payment plans) that reimburse employees for medical premiums paid for coverage under a health plan maintained by a spouse's employer. The key to making these reimbursements on a tax-free basis is that the HRA may reimburse only those premiums that were paid on an after-tax basis." (Spencer Fane)
Three Ways to Prevent Health Risk Assessment Fatigue
"In the anatomy of a corporate wellness program, the health risk assessment with biometric screening is equivalent to the heart. However, many employers who have offered this important health-status indicator are beginning to question its long-term value. A well-executed and outcomes-based [health risk assessment (HRA)] keeps the program running smoothly and effectively because all other elements depend upon its accurate assessment and ongoing data. When employers do not experience positive results, including long-term cost savings, positive health outcomes and/or improved productivity promised from the HRA, the result is HRA fatigue." (Employee Benefit News)
How Many Employers Could Be Affected by the Cadillac Tax?
"Looking first at the expected costs for just plan premiums plus employer contribution to HSAs and HRAs, we estimate that about 16 percent of employers offering health benefits would have at least one health plan that would exceed the $10,200 HCPT self-only threshold in 2018, the first year that plans are subject to the tax. The percentage would increase to 22 percent in 2023 and to 36 percent in 2028.... These percentages rise significantly when we consider the impact that FSA options can have: up to 26 percent in 2018, 30 percent in 2023 and 42 percent in 2028[.]" (Henry J. Kaiser Family Foundation)
[Guidance Overview] Retiree HRAs and the ACA: Doing It Right (PDF)
"[E]mployers may want to transition their pre-Medicare retirees to marketplace coverage -- and provide them with financial assistance to help pay for the coverage or to offset some of the cost-sharing burden. Not only may this approach reduce ongoing costs, but it may also help mitigate or eliminate the Cadillac tax on retiree coverage. Employers that want to provide financial assistance through health reimbursement arrangements will need to proceed carefully to avoid potentially unwelcome consequences." (Buck Consultants at Xerox)
[Guidance Overview] ACA Reporting Requirements for Carriers and Employers (Part 5 of 24): Reporting of Health Reimbursement Arrangements Under Code Section 6055
"The Draft 2015 Instructions contain an unpleasant clarification on the subject of Health Reimbursement Arrangements, saying essentially that an employer that maintains an insured group plan and a self-funded Health Reimbursement Arrangement (HRA) must separately report the HRA coverage." (Mintz Levin)
[Guidance Overview] IRS PLR Addresses Tax Treatment of HRAs Established as Retiree Benefit Alternative
"[IRS Private Letter Ruling 201528004 (Apr. 6, 2015)] is notable for its apparent validation of a design that allows longer-term employees to choose between existing retiree health benefits and a new HRA benefit. Previous rulings have not allowed a choice between cash payments and the contribution of unused leave to an HRA; here, the choice simply determines whether the unused leave will go to pay premiums directly or through the mechanism of an HRA that also reimburses other medical expenses (there is still no cash option). Also noteworthy is the IRS's affirmation that the HRAs could be used to reimburse the cost of registered domestic partners' medical coverage on an after-tax basis." (Thomson Reuters / EBIA)
[Guidance Overview] IRS Finds HRA Contributions for Retirees and Dependents Were Exempt from Gross Income
"Contributions made by the taxpayer to the retiree HRA on behalf of eligible retirees, spouses, and eligible dependents that were used exclusively to pay for eligible medical expenses were excludable from the retirees' gross income under Code Sec. 106. Further, contributions made to the retiree HRA on behalf of eligible retirees, spouse and eligible dependents were not wages subject to FICA taxes ... FUTA taxes ... or income tax withholding ... The taxpayer represented that amounts in the retiree HRA would only be used to reimburse health insurance premiums and medical expenses[.]" [IRS Private Letter Ruling 201528004, dated Apr. 6, 2015, released Jul. 10, 2015] (Wolters Kluwer Law & Business)
[Guidance Overview] Health Reimbursement Accounts and the Military Health System
"MHS differs from the private sector in that any payments received from these payment types as part of cost-sharing are not accepted. If an HRA payment is made to cover an HDHP copay and/or a deductible, then it must be returned to the payer per 32 CFR 220.2(b). However, unlike FSAs and HSAs, HRAs are not paid into by beneficiaries, but are established and funded by the employers in order to provide greater control over their health care coverage." (Altarum Institute)
[Guidance Overview] HRAs, FSAs and Employer Reimbursements for Health Insurance: Navigating the ACA
"By design, HRAs, Health FSAs and Employer Payment Plans, standing alone, cannot satisfy certain requirements of the ACA.... These arrangements may be structured, however, to be exempt from the ACA requirements. The following exceptions may apply. HRA Integrated with Group Health Plan.... Arrangement that Provides Excepted Benefits (Including an EAP and Limited Wraparound Coverage)... Health FSA.... Payroll Practice.... Retiree-Only or Single Employee Health Plan.... Medicare Premium Reimbursement Arrangement.... TRICARE-Related HRA." (von Briesen & Roper, s.c.)
[Guidance Overview] FSA, HRA, HSA Comparison Chart
"The minimum deductible for an HSA compatible HDHP plan remains at $1,300 for self-only coverage and $2,600 for family coverage. The 2016 HDHP out-of-pocket maximums will be $6,550 for single coverage and $13,100 for family coverage, an increase of $100 and $200 respectively. Also new for 2016, is the requirement that all plans limit the maximum out-of-pocket incurred by any one person to the single out-of-pocket limit of the plan, even if the individual is enrolled in family coverage." (Marsh Consulting Group)
[Guidance Overview] Who Can Incur Qualified Eligible Medical Expenses in an FSA, HRA, or HSA?
"[A] child that files his or her own taxes and has not turned 27 by December 31st may still incur qualified medical expenses against the employee's FSA or HRA for that child. Whether the child is enrolled in college, or is actually enrolled in the employer's group health plan does not have any effect on whether they may incur qualified medical expenses against the employee's FSA or HRA.... For HSA purposes, unlike an FSA or HRA, the rules remain as they were prior to 2010 to exclude a child who is not a tax dependent from having their expenses reimbursed from the HSA." (Kushner & Company)
[Guidance Overview] IRS Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans (PDF)
22 pages. "This publication explains the following programs: Health savings accounts (HSAs); Medical savings accounts (Archer MSAs and Medicare Advantage MSAs); Health flexible spending arrangements (FSAs); Health reimbursement arrangements (HRAs)." (Internal Revenue Service [IRS])
The Aftermath of Hobby Lobby: HSAs and HRAs as the Least Restrictive Means
"An HSA or HRA permits the covered employee to spend employer-provided, pre-tax health care dollars on any medical service the employee chooses without implicating the employer in the employee's spending decision. The HSA/HRA alternative respects the religious rights of sponsoring employers since, unlike conventional insurance or self-insured health plans, the sponsoring employer's plan does not provide a menu of choices which frames the employees' decisions." (Prof. Edward A. Zelinsky, via SSRN)
Administration Delays Another Health Care Rule for Small Businesses
"In the latest in a long string of delays in enforcing the rules under the health care overhaul, the [IRS] announced ... that they will wait until summer to start enforcing financial penalties on small businesses that provide so-called Health Reimbursement Arrangements to their employees.... Katie Vlietstra, vice president for government relations and public affairs at the National Association for the Self-Employed ... [called] the short delay 'welcome news for our community' but [insisted] that 'a long-term, legislative solution is still urgently needed.' She added: 'America's smallest employers need the stability of a permanent fix in order to continue to utilize this critical tool to help provide health care coverage to their employees.' " (The Washington Post; subscription may be required)
[Guidance Overview] IRS Grants Limited Transition Relief to Small-Employer Premium Reimbursement Arrangements
"Although ALEs with 50 to 99 full-time employees (including full-time equivalents) may rely on a different transition rule to avoid any ACA 'play-or-pay' penalties during 2015, there is no similar relief in Notice 2015-17.... Note that this transition relief is limited not only in duration (i.e., only through June 30, 2015), but also in scope. It applies only to a small employer's reimbursement (or direct payment) of health premiums ... Small employers now have just over four months in which to wind down any impermissible premium-reimbursement arrangement. In its place, they may wish to adopt a plan through a SHOP Marketplace. Although individuals may enroll through a Marketplace during only annual or special enrollment periods, there is no such limitation on an employer's ability to adopt a plan through a SHOP." (Spencer Fane)

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