The IRS provided guidance (Notice 2013-54) on how certain provisions of the Patient Protection and Affordable Care Act (Affordable Care Act) apply to health reimbursement arrangements (HRAs), health flexible spending arrangements (FSAs) and certain other employer health care arrangements.
The notice provides that an HRA that is used to purchase health coverage on the individual market will fail to comply with the annual dollar limit prohibition and the preventive services requirements of the Affordable Care Act. However, an HRA that is integrated with a group health plan will meet these requirements as long as the group health plan meets the annual dollar limit and preventive services requirements. An HRA is considered integrated with a group health plan if it meets the requirements under either of two integration methods provided in the notice.
Regarding FSAs, if an employer provides a health FSA that does not qualify as an "excepted benefit," the health FSA is generally subject to Affordable Care Act market reforms, including the preventive services requirements. Because a health FSA that is not an excepted benefit is not considered integrated with a group health plan, it will fail to meet the preventive services requirements of the act.
Health FSAs will be considered to provide excepted benefits only if the employer also makes available group health plan coverage that is not limited to excepted benefits, and if the health FSA is structured so that the maximum benefit payable to any participant cannot exceed two times the participant's salary reduction election for the health FSA for the year (or, if greater, cannot exceed $500 plus the amount of the participant's salary reduction election).
Until the IRS issues final rules, and through at least 2014, an employee assistance program (EAP) will constitute excepted benefits only if the EAP does not provide significant benefits in the nature of medical care or treatment (determined under a reasonable, good faith interpretation). As a result, EAPs generally will not be required to comply with Affordable Care Act requirements.
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