Joint proposed regulations by the Departments of Treasury, Labor (DOL), and Health and Human Services (HHS) were recently issued regarding Health Reimbursement Arrangements (HRAs). The proposed rules expand the use and availability of HRAs. However, taxpayers cannot rely on the proposed regulations because the effective date is for plan years beginning on or after January 1, 2020.
The proposed rules keep the current types of permitted HRAs such as integrated, excepted benefits and retiree-only HRAs, in addition to Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs). They also add two new types of HRAs. Below are highlights of the two new HRAs:
- Premium Reimbursement HRA
- Reimburses individual health insurance premiums if the employee and all HRA covered dependents are actually enrolled in a major medical plan.
- Employer does not offer traditional major medical coverage to the employee or others in the same class of employees.
- Substantiation is required for reimbursement.
- HRA must be offered to all employees within a designated class (Full-time; Part-time; Seasonal; etc.)
- A notice must be provided to employees 90 days prior to the start of the plan year, or if the employee becomes eligible after the start of the plan year, prior to the effective date of coverage.
- Employees must be allowed to opt out and waive benefits at least annually.
- Excepted Benefit HRA
- Employees are eligible only if they are also offered coverage under another group health plan sponsored by the same employer. Employees are not required to participate in the employer sponsored coverage, however.
- Employees cannot also be offered a Premium Reimbursement HRA (discussed above).
- The terms and conditions must be the same for all similarly situated classes of employees.
- Allows up to $1,800 per year (adjusted for inflation) plus any carryover amounts in tax-free reimbursements.
- Reimbursements may include:
- General 213(d) medical expenses (but not group health premiums)
- COBRA Premiums
- Short Term Limited Duration Insurance Premiums
- Excepted Benefit Premiums
Nyhart will keep abreast of any new developments or guidance related to the proposed regulations. Final guidance is expected in 2019 ahead of the January 1, 2020 effective date. Feel free to contact your Nyhart consultant with any questions in the meantime.