COLUMBUS, OH / ACCESSWIRE / July 1, 2019 / Effective January 1, 2020, employers can establish two new Health Reimbursement Accounts (HRAs) - an Individual Coverage HRA (ICHRA) and an Excepted Benefit HRA (EBHRA). This could be a significant development for employers sponsoring employee health benefit plans - both insured and self-funded.
Questions Employers Should Ask
Employers should consider the following questions regarding the impact of the new rules.
- Will the new HRA rules change how your organization delivers health benefits? If so, how?
- Do you believe these new rules will facilitate more job mobility? If so, how will that trend impact your ability to retain talent, or attract new associates?
Effective January 1, 2020, two new HRAs can be established.
Individual Coverage HRA (ICHRA)
As long as the individual purchases ACA-compliant health coverage, the employer (of any size) can reimburse the employee for those premiums subject to these rules:
- Short-term Limited Duration Insurance (STLDI) policies don't qualify as ACA-compliant coverage
- The employer cannot also offer a traditional group health plan in addition to the ICHRA
- Offering an ICHRA will satisfy the ACA employer mandate under Section 4980H so long as a) the affordability threshold is met; and b) the employer makes the ICHRA available to entire classes of employees, such as FTEs, or PTEs. However, there are minimum class sizes:
- For those employers with less than 100 employees: minimum class of 10 employees
- For employers with 100-200 employees: the minimum class is 10% of total employees
- For employers with more than 200 employees: the minimum class is 20 employees
- A notice of the availability of an ICHRA must be provided at least 90 days prior to the beginning of the plan year (a model notice accompanied the final regulations)
- When an employee or their dependent gains access to an ICHRA, a Special Enrollment Period applies
- The amounts contributed to the HRA must not favor highly compensated individuals-there are only two instances in which the employer's HRA contributions can vary: a) older employees may receive higher amounts (but not to exceed a 3:1 age band); or b) employees with greater numbers of covered dependents may receive a higher amount
- There is no limit on the amount the employer can contribute to the ICHRA and
- The amount of the ICHRA reimbursement is not taxable to the employee
Excepted Benefit HRA (EBHRA)
Those employers wishing to continue offering traditional health benefits (including PPOs, HMOs, or qualified high deductible health plan/HSA plans) can offer an EBHRA to pay:
- Out-of-pocket medical expenses
- Dental benefits
- Vision benefits or
- STLDI premiums
Although these reimbursements are also tax-exempt, the amount that can be contributed by the employer is limited to $1,800 per year. This amount will be indexed for inflation after 2020.
An employee could opt-out of his/her employer-sponsored health plan and still be eligible for the EBHRA. However, an employee cannot have both an ICHRA and an EBHRA.
Findley is an independent human resources and employee benefits consulting and solutions firm that delivers value, responsiveness and expertise to help clients navigate today's evolving business environment. With 50 years of experience, the firm partners with clients to align people and benefits strategies with business goals. Findley's more than 250 associates are located in Chicago, Cleveland, Columbus, Ohio, Toledo, Ohio, Louisville, Ky., Pittsburgh, Pa., and Nashville, Tenn., and serve more than 2,000 clients across all 50 states. To learn more visit findley.com.
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For additional information about actions plan sponsors should consider as a result of the new HRA Rules plus details about how we got to this point, read the full article.
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SOURCE: Findley, Inc.