Although the Employer Shared Responsibility provisions of the Patient Protection and Affordable Care Act (PPACA) do not apply to small employers (typically those with fewer than 50 full-time equivalent employees), many small Employers still want to offer some health benefits. to their employees.
One option that provides health benefits beyond adopting a traditional health plan is a health reimbursement arrangement (HRA). Although health insurance reimbursement arrangements may seem simple and manageable, employers should be aware of certain compliance requirements.
What is HRA?
Under the HRA, an employer makes available funds (up to a specified maximum amount) to reimburse employees and their dependents for certain medical expenses. Common medical expenses reimbursed under an HRA include co-pays and deductibles, prescription drugs, and insurance premiums. If properly structured, neither the employer's contributions to her HRA nor the participant's refunds will be treated as taxable income.
What's the catch?
Under current law, with some limited exceptions, employers generally cannot offer current employees “stand-alone” HRAs, i.e., HRAs that are not integrated with a major health plan. One exception to this rule, which may be an attractive option for some small employers, is the Qualified Small Employer HRA (QSEHRA).
QSEHRA Requirements
In general, QSEHRA requirements include:
- To adopt the QSEHRA, an employer must not be an “applicable large employer” (ALE) within the meaning of PPACA and must not maintain a separate group health plan. (Both of these limits are applied on a control group/associated service group basis.)
- The QSEHRA must be funded solely by employer contributions and not by employees (including through cafeteria plans).
- The QSEHRA must be made available to all eligible employees on the same terms and conditions.
- The QSEHRA can reimburse expenses up to an inflation-indexed annual limit only if the employee provides proof of minimum essential coverage under another health plan.
- Employers must provide specific notice to all covered employees prior to the start of the plan year.
- Employers must annually report eligible benefits and taxable expenses paid (if any) under the QSEHRA on an employee's Form W-2.
For more information on the rules applicable to QSEHRA, see IRS Notice 2017-67.
Small employers considering using the QSEHRA should carefully review applicable guidance or consult experienced legal counsel, as some of the requirements listed in the notice may be surprising. You need to consult. For example, the IRS says that providing dental or vision coverage (which an employer may not typically consider “health insurance”) disqualifies the employer from offering her QSEHRA. I'm taking a stand.
What are the compliance considerations when offering QSEHRA?
Unlike traditional HRAs, QSEHRAs generally comply with 1) group health plan requirements under the Internal Revenue Code, the Employee Retirement Income Security Act of 1974 (ERISA), and the Public Health Service Act (e.g., the requirement to provide a summary of benefits; ) is not applicable. (SBC), 2) Continuing Coverage Requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), or 3) PPACA Reporting Requirements.
However, unless certain exceptions apply, the QSEHRA generally teeth Other rules that are independent of Group Health Plan status apply, including:
- ERISA Requirements for Benefit Plans – Examples: Requirement to maintain written plan documentation and summary plan description (SPD)
- Medicare Secondary Payer/Medicare Part D Reporting and Disclosure Requirements
- Patient-Centered Outcomes Research Institute (PCORI) fee application
- Health Insurance Portability and Accountability Act (HIPAA) privacy and security requirements (unless the QSEHRA is self-administered by the employer)
The federal legal considerations discussed here are not exhaustive. Additionally, many states limit employer contributions to an individual's health insurance coverage (although some states add an exemption for her QSEHRA, and others limit his ERISA). ).
conclusion
Reimbursing medical expenses may seem like a no-brainer, but current law allows employers to reimburse medical expenses, including personal health insurance premiums, unless they meet the requirements of a permissible HRA (such as a QSEHRA). There are no refunds. QSEHRA offerings can be an attractive option for small employers who are prepared to comply with specific requirements.
If you need assistance implementing or updating your QSEHRA for regulatory compliance, or have questions about other health and benefits plan options, please contact the author, another member of Holland & Knight's Executive Compensation and Benefits team, or Contact Holland & Knight's lead attorney. .
The information contained in this alert is for the general education and knowledge of the reader. It is not designed to be, and should not be used as, a sole source of information in analyzing and resolving legal issues. It also should not be used in place of legal advice that relies on specific factual analysis. Additionally, the laws in each jurisdiction are different and constantly changing. This information is not intended to, and receipt of this information does not create, an attorney-client relationship. If you have specific questions regarding your particular factual situation, you are encouraged to consult the author of this publication, a representative of Holland & Knight, or other qualified legal counsel.
