Standalone HRAs for Small Employers Now Permitted
On December 13, 2016, President Obama singed the 21st Century Cures Act into effect that provides welcome relief to small employers concerning health reimbursement arrangements. As background, the Affordable Care Act effectively prohibited employers from offering health reimbursement arrangements that were not integrated with qualifying group health plans, which eliminated the long standing practice of small employers reimbursing employees for premiums paid towards individual health insurance policies.
The Act rolls back that rule for employers that are not considered “large employers” for Affordable Care Act Purposes (those employers having 50 or more full-time equivalents) and that do not offer a health plan to employees. The Act creates qualified small employer health reimbursement arrangements which are available for plan years starting after 2016. Such arrangements must be funded solely with employer money that provides for payment or reimbursement of medical care expenses, up to $4,950 per year for individuals ($10,000 for families). In Addition, these arrangements must be provided to all eligible employees of the employer on the same terms, and the employer must provide notice to the eligible employees. These arrangements could permit reimbursements for individual health insurance premiums and are not subject to COBRA.
More guidance is expected to come, specifically regarding the definition of “eligible employee.” Stay tuned for further updates and do not hesitate to contact us with any questions.