Health Reimbursement Arrangements (HRAs) are Changing for 2020: What You Need to Know!
By Tracey F. Martin, CPA, Partner
The Departments of Labor, Health and Human Services and the Treasury Department collectively issued rules in June that provide two new options for HRAs. These new rules are effective January 1, 2020.
Individual Coverage HRA
Current regulations prevent employers from offering stand-alone HRAs that allow employees to purchase health insurance on the individual market. The rules issued in June create a new Individual Coverage Health Reimbursement Arrangement (ICHRA). The ICHRA can be set up and funded by employers solely to be used by employees to pay for individual health coverage, or it may be set up to also allow medical expense reimbursements similar to a traditional HRA. As with most new regulations, the requirements associated with ICHRA are detailed in nature and include, among other things, that HRA participants must not be eligible for their employer group health plan and must be enrolled in individual health coverage (or Medicare). There are also regulations surrounding nondiscrimination, notice to participants, limits based on permitted classes of employees, and employee contributions to the plan.
Excepted Benefit HRA
Where the ICHRA may be offered only to employees who are not eligible for their employer’s group health plan, the new Excepted Benefit HRA is only available to employees who are eligible for their employer’s group health plan, regardless of whether they are actually enrolled or not. These new rules allow for a stand-alone Excepted Benefit HRA to be offered with an employer sponsored group health plan. The Excepted Benefit HRA is subject to annual limits ($1,800 for 2020) and, similar to Flexible Spending Accounts, can be used for all §213(d) expenses except for individual health insurance premiums.
Additional information related to these new health coverage options, including how they may meet or not meet the ACA employer mandate, may be found here.
As always, make sure to contact your insurance and tax advisors to discuss these new rules and how you and your employees might benefit from them.
Tracey Flynn Martin Partner, CPA
Tracey has over 30 years of experience as a CPA and is a tax and consulting partner in our Wilmington office. She applies her knowledge and practical ideas to meet the needs of firm clients from both a business and tax perspective. Tracey leads our Firm’s CAS service line (Client Accounting Solutions – a […]