Final Regulations Expand Options for HRAs

On Thursday, June 13, the combined agencies of the Department of the Treasury, the Department of Labor, and the Department of Health and Human Services (“the agencies”) released final rules allowing for the reimbursement of premiums for individual coverage through an employer sponsored HRA.  These changes also allow for some HRAs to qualify as excepted benefits under the Affordable Care Act (“ACA”).  These changes revert the rules concerning the arrangements to a state similar to pre-ACA changes. Both changes are effective as of January 1, 2020. Some of the initial points of interest include:

Reimbursement of Individual Premiums

  •  An Individual Coverage HRA (ICHRA) can constitute Minimum Essential Coverage under the Employer Mandate
  • An ICHRA can also meet the affordability standards under the Employer Mandate
    • The IRS “will provide more information on how the employer mandate applies to Individual Coverage HRAs soon.”
  • In order for the purchased individual plan to avoid a designation as a group health plan (and therefore be subject to ERISA), the plan sponsor must;
    • Avoid endorsing any individual plan
    • Not receive any consideration from a carrier that provides individual coverage to a reimbursed participant
    • Provide an annual notice specifically stating that the individual health insurance purchased is not subject to ERISA
  • Employers can allow employees to pay for the remaining unreimbursed cost of coverage, if any, pre-tax through a §125 plan so long as the coverage wasn’t purchased through an Exchange
  • Employers can increase the amount available under an ICHRA based on the employee’s age or number of dependents
  • Employers cannot offer an ICHRA to any employee that is also offered a traditional group health plan
  • Employers can offer ICHRAs to some classes of employees while not offering the ICHRAs to other classes

Certain HRAs Offered as Excepted Benefits

Currently, almost all HRAs must be integrated with other group health plan coverage (whether the employer’s group health plan or the group health plan of another employer) in order for the HRA to comply with the ACA.  HRAs can now qualify as excepted benefits, similar to health FSAs, if they meet the following guidelines provided by the agencies:

  • The annual HRA contribution must be limited to $1,800 per year (indexed for inflation beginning in 2021).
  • The HRA must be offered in conjunction with a traditional group health plan, although the employee is not required to enroll in the traditional plan.
  • The HRA cannot be used to reimburse individual health insurance premiums, group health plan premiums (other than COBRA), or Medicare premiums, although it can reimburse premiums for excepted benefits, such as dental and vision coverage, as well as for STLDI.
  • The HRA must be uniformly available to all similarly situated individuals (as defined under the Health Insurance Portability and Accountability Act, which generally permits bona fide employment-based distinctions unrelated to health status).

Video Overview

This video provides an overview of key changes included in the final rule. Click here to Watch

Questions about how the new regulations impact your business? Contact your Hays Representative today.

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