On December 13, 2016, President Obama signed into law the 21st Century Cures Act,
which allows small employers to maintain health reimbursement
arrangements (HRAs) for the purpose of reimbursing employees for
the cost of premiums for individual health insurance
policies.
As background, the IRS provided in Notice 2013-54 that employers who
maintain HRAs that reimburse employees for the cost of premiums for
individual health insurance policies violate the Patient Protection
and Affordable Care Act (PPACA), subjecting such employers to
potential excise taxes of $100 per day per affected employee. In Notice 2015-17, the IRS provided
transition relief from these excise taxes to small employers not
subject to the PPACA's employer mandate. The transition relief
under this notice ended on June 30, 2015.
The Cures Act extends the penalty relief set forth in Notice
2015-17 through December 31, 2016, and permanently exempts from
these excise taxes Qualified Small Employer Health Reimbursement
Arrangements (QSEHRAs), effective January 1, 2017. To qualify as a
QSEHRA, an employer must satisfy the following requirements:
- Employ on average less than 50 full-time employees and full-time equivalents
- Not offer group health coverage to any employees
- Offer HRA coverage to all employees, with certain permitted exclusions (e.g., part-time and seasonal employees)
- Offer HRA coverage on the same terms to all eligible employees, with certain permitted variations based on the price of an individual policy (e.g., age and number of enrolled family members)
- Offer HRA benefits that do not exceed $4,950 for individual coverage and $10,000 for family coverage (adjusted for inflation in future years)Distribute a specific annual notice regarding details of the employer's HRA plan
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.