3. www.FridayFirm.com
New HRA Designs
What is an HRA?
- Employer Funded arrangement that reimburses employees for certain
medical expenses incurred by the employee and his/her spouse and
dependents
- Typical Design – unfunded account based arrangement that reimburses
eligible medical expenses up to a fixed dollar amount per plan year.
- HRA must be 100% employer contributions meaning no salary
reduction/cafeteria plan contributions
- Reimbursements to employees are tax advantaged under Code Sec. 105
and 106
4. www.FridayFirm.com
New HRA Designs
Current types of HRAs
- Traditional HRA – integrated with group health plan
- Limited purpose HRA – dental and vision only
- Retiree-only HRA
Limitations of Traditional HRA
- Considered a Group Health Plan
- Subject to ACA requirements including:
- Prohibition on annual/lifetime limits
- Preventive health services mandate
- To avoid ACA rules, HRA must be integrated with a group health plan
5. www.FridayFirm.com
New HRA Designs
New Arrangements:
- Qualified Small Employer HRA (QSEHRA)
- Individual Coverage HRA (ICHRA)
- Excepted Benefit HRA
QSEHRA
- Special type of HRA available to small employers that is not considered a
group health plan (i.e., not subject to ACA requirements) (also not subject
to COBRA)
6. www.FridayFirm.comwww.FridayFirm.com
New HRA
Designs -
QSEHRA
Specific requirements
- Only available to small employers (i.e., employers
with fewer than 50 full-time equivalent employees)
that do not sponsor a group health plan
- Applies on a control group basis
- Must be funded by employer contributions (no
salary reduction)
- QSEHRA can be used to reimburse employees
for medical care under Code Sec. 213 incurred
during the period of coverage
- Includes medical expenses as well as individual
health insurance premiums
7. www.FridayFirm.comwww.FridayFirm.com
New HRA
Designs -
QSEHRA
Specific requirements continued:
- The QSEHRA may have a run-out period but
cash-outs are prohibited
- Proof of Coverage – employees/dependents must
be enrolled in minimum essential coverage for the
month in which the expenses are incurred
- Methods of proof: third party proof (e.g., EOB or
insurance card) or employee attestation
- Maximum benefit limits (2019):
- $5,150 – self only coverage
- $10,450 – family coverage
- Note: it is possible to receive up to the statutory limit from
more than one employer as long as the employers are not
part of the same control group
8. www.FridayFirm.comwww.FridayFirm.com
New HRA
Designs -
QSEHRA
Nondiscrimination Rules
- Benefits must be provided on the same terms to
all eligible employee
- Eligible Employee = any employee of employer
- Permitted exclusions:
- Employees who have not completed 90 days of
service
- Employees under age 25
- Part-time or seasonal employees
- Union employees
- Non-resident aliens who receive no earned
income from sources in the U.S.
9. www.FridayFirm.comwww.FridayFirm.com
New HRA
Designs -
QSEHRA
Nondiscrimination Rules continued
- Failing nondiscrimination rules means the plan
does not qualify as a QSEHRA
- Consequences include requirement to comply
with PHSA and other health mandates
- Failure to comply with these mandates could
trigger excise taxes of $100 per person per day
Notice Requirement – 90 days before the
beginning of each plan year
10. www.FridayFirm.com
New HRA Designs - ICHRA
- New regulations expanding the landscape of permissible HRA
design become effective 1/1/2020 and include the rules for
ICHRA
- Primary purpose is to allow employers to reimburse employees
for premiums paid for medical coverage in the individual
market, Medicare related coverage and Code Sec. 213
expenses.
- Key Features:
- ICHRA is not integrated with a group health plan
- Unlike QSEHRA, the ICHRA is not limited to small employers
11. www.FridayFirm.com
Individual Coverage: Individuals covered by the ICHRA must be
enrolled in individual market coverage that complies with PHSA
mandates or Medicare (Parts A and B or Part C)
- ICHRA will be deemed to be integrated with the individual or Medicare
coverage (meaning that the ICHRA will be exempted from PHSA
mandates
New HRA Designs – ICHRA
Special Requirements
12. www.FridayFirm.com
New HRA Designs – ICHRA
Special Requirements
Coverage Substantiation: ICHRA must implement reasonable procedures
for substantiating individual health coverage for employee and dependents
- Annual substantiation: required prior to first day of plan year
- Third party documentation (insurer or Exchange) in the form of insurance card, EOB
or Exchange documentation
- Participant attestation – must include name of coverage provider and date of coverage
- Ongoing substantiation required with each request for reimbursement
- Must show that the participant or dependent incurred the expense and was enrolled in
individual medical coverage when the expense was incurred
- Same form of documentation as annual substantiation
- Note: reliance permitted unless plan sponsor has actual knowledge to the contrary
- Model language available
13. www.FridayFirm.com
Conditions on Reimbursement
- Expenses cannot be reimbursed after individual medical coverage
ceases
- Balance remaining after loss of individual coverage will be forfeited
New HRA Designs – ICHRA
Special Requirements
14. www.FridayFirm.com
Eligibility: Coverage must be offered on same terms and
conditions to all employees in the same class
- Exception: max contribution can vary based on age (3:1) or family size
(i.e., number of dependents)
- Variations must be uniform, i.e., max contribution consistent across
employees of same age or with same number of dependents
- Non-Discrimination
- If only benefit is reimbursement of premiums then plan not subject to
105(h)
New HRA Designs – ICHRA
Special Requirements
15. www.FridayFirm.com
NEW HRA DESIGNS – ICHRA
Special Requirements
Permitted Classes
- Full-time employees (defined as employees who are full-time under Code §4980H or
who are not part-time under the Code §105 regulations, as elected by the ICHRA
sponsor);
- Part-time employees (defined as employees who are not full-time under the Code
§4980H regulations or who are part-time under the Code §105 regulations, as elected by
the ICHRA sponsor);
- Employees who are paid on a salaried basis;
- Non-salaried employees (e.g., hourly employees);
- Employees whose primary site of employment is in the same rating area (as defined
under health care reform’s rules for establishing individual market premiums);
- Seasonal employees (as defined under Code §4980H or the Code §105 regulations, as
elected by the ICHRA sponsor);
16. www.FridayFirm.com
New HRA Designs – ICHRA
Special Requirements
Permitted Classes Continued
- Employees included in a unit covered by a particular collective bargaining
agreement (or an appropriate related participation agreement) in which
the ICHRA sponsor participates, as described under Code §105;
- Employees who have not satisfied a waiting period for coverage, if the
waiting period complies with health care reform’s waiting period
requirements;
- Nonresident aliens with no U.S.-based income;
- Employees hired for temporary placement at an unrelated entity; and
- Employees who are in a combination of two or more of the classes (e.g.,
full-time employees covered by a particular collective bargaining
agreement).
17. www.FridayFirm.comwww.FridayFirm.com
New HRA
Designs –
ICHRA
Special
Requirements
No Traditional Group Health Plan
- ICHRA sponsor can’t offer traditional group health
plan coverage to any employee in the same class
that is offered ICHRA coverage.
- Exception for new hires
- If the employer offers both a traditional group
health plan to some classes of employees and an
ICHRA to other classes, then a minimum class
size requirement will apply
- Minimum class size applies to full-time (if part-
time are offered group health), part-time (if full-
time offered group health), salaried, non-
salaried, employees based on rating area and
any class created by a combination of any of the
preceding classes
Minimum number of
employees in a class:
<100 Employees = 10
100 to 200 employees =
10% of total number of
employees
>200 employees = 20
18. www.FridayFirm.comwww.FridayFirm.com
New HRA
Designs –
ICHRA
Special
Requirements
- Opt-Out/Waiver Opportunity
- Must be given an opportunity to opt-out of or waive
participant each plan year.
- Notice Requirement: must be provided at least 90 days
before the beginning of each plan year or no later than date
employee is first eligible to participate in ICHRA if not
eligible at beginning of the year.
- Notice Content Includes:
- Description of ICHRA terms and conditions
- Explanation of substantiation requirement
- Maximum contribution for the year
- Explanation of the different types of HRAs
- Statement of requirement to be enrolled in individual
health coverage
- Statement of right to opt-out or waive future
reimbursements
- Description of potential availability of premium tax credit
Additional required content in
model notice located at:
www.fridayfirm.com/taxseminar
19. www.FridayFirm.com
New HRA Designs - ICHRA
ICHRA and Cafeteria Plans
- Employer can establish a cafeteria plan with the ICHRA to allow
employees to pay on a pre-tax basis the portion of individual coverage
premiums not covered by the ICHRA
- Pre-tax salary reduction not available for Exchange coverage
- Pre-tax salary reduction for individual coverage premiums without an
ICHRA is prohibited
20. www.FridayFirm.com
New HRA Designs – ICHRA
Interaction with ACA
- The “(a)” Penalty – employer must offer minimum essential coverage to at
least 95% of all full-time employees to avoid the penalty under 4980H(a)
- ICHRAs are group health plans which means they are considered
minimum essential coverage for ACA (no 4980H(a) penalty) – no
$2,000 per full-time employee penalty
- The “(b)” Penalty – employer must offer group health plan coverage that
meets both the affordability and minimum value requirements under the
ACA
- Proposed regulations issued on Sep. 30 provide that an ICHRA will be
deemed to meet minimum value if it is affordable. The question is how
to determine affordability
21. www.FridayFirm.com
New HRA Designs - ICHRA
ICHRA and Medicare
- Medicare Secondary Payer – prohibits employers subject to MSP from
offering incentives to active employees to elect Medicare rather than
employer sponsored group health plan coverage
- Regulations provide that an employer subject to MSP can offer ICHRA to
a class of employees that includes employees that are eligible for or
enrolled in Medicare. AND reimbursement or Medicare of supplemental
premiums through the ICHRA is not an impermissible financial incentive
under MSP
22. www.FridayFirm.com
New HRA Designs - ICHRA
- Conditions for compliance
- ICHRA can’t limit reimbursement of medical expenses to expenses not
covered by Medicare
- ICHRA must be offered on the same terms and conditions to all
employees in a class of employees regardless of Medicare eligibility
- Can’t offer to only employees eligible for Medicare
- Note: if the ICHRA reimburses 213(d) expenses, the ICHRA will generally
be primary to Medicare (reporting requirement applies)
23. www.FridayFirm.com
New HRA Designs - EBHRA
- 2019 Regulations also established a type of HRA for purposes
of reimbursing excepted benefits (EBHRA)
- Prior to new law, only alternative was limited purpose HRA
which could reimburse for dental and vision only
- EBHRA can be used to reimburse limited purpose benefits as
well as other non-reimbursed medical expenses (e.g., cost
sharing, deductibles)
- Effective 1/1/2020
24. www.FridayFirm.comwww.FridayFirm.com
New HRA
Designs –
EBHRA
Specific
Requirements
Other Coverage – employer must offer traditional group health
plan coverage to employees covered by the EBHRA
- Note: Actual enrollment in traditional group health plan not
required
Benefit Limits – for 2020 the maximum amount available under
the EBHRA is $1,800. The benefit maximum for each year will be
adjusted for cost of living
- Benefit maximum is cumulative for other HRAs or account
based plan offered by the employer for same time period –
unless the account based plan is an excepted benefit (e.g.,
health FSA)
Reimbursements
- Out of pocket medical expenses other than premiums for
individual health coverage, Medicare or non-COBRA group
coverage
- Premiums for short term limited duration insurance
25. www.FridayFirm.comwww.FridayFirm.com
New HRA
Designs –
EBHRA
Specific
Requirements
Uniform Availability – must be made available
under the same terms and conditions to all
similarly situated individuals
- Similarly situated:
- Groups of participants (employees and former
employees) based on a bona-fide employment-
based classification e.g., full-time/part-time, date
of hire, occupation, geographic location, length of
service, etc.
- Participant vs. beneficiaries
- Groups of beneficiaries based on employment
classification
26. www.FridayFirm.com
New HRA Designs - Comparison
Eligible
Expense
Eligible
Employer
Eligible
Employee
Benefit
Limit
COBRA ACA Other Group
Health Plan
Coverage?
Traditional 213(d) Any
employer
offering GHP
Employees
enrolled in
GHP
No Limit Applies HRA is considered
a GHP but ACA
requirements met
through integrated
GHP
HRA is required
to be integrated
with other group
health plan
coverage
Limited
Purpose
Dental or vision
expenses
Any
employer
Any No Limit Applies Not subject to ACA No Impact
QSEHRA 213(d) +
individual
premiums
Small
employer no
GHP
Employees
enrolled in
MEC
$5,150
single;
$10,450
family
N/A Not subject to ACA QSEHRA not
available if other
coverage is
offered to
employees
ICHRA 213(d) +
individual
premiums &
Medicare
Any
Employer
Employee
enrolled in
individual or
Medicare
No Limit Applies ACA applies, can
be MEC,
affordable MV
coverage
ICHRA not
available of
employee also
offered GHP
EBHRA 213(d) +
premiums for
excepted, STLDI
Any
employer
offering GHP
Employee
eligible for
GHP
$1,800 Applies Not subject to ACA Other GHP
required
27. www.FridayFirm.com
ICHRA AND EBHRA are subject to ERISA and will be subject to
the following requirements:
- Plan document requirement
- Summary Plan Description
- HIPAA administrative simplification including privacy and security
- Form 5500
- Compliance with ERISA claims procedures
New HRA Designs – Erisa
Considerations
28. www.FridayFirm.comwww.FridayFirm.com
Proposed
Form 5500
Changes
Current Reporting Rules for Welfare Plans
- Limited to plans covering 100 or more employees
- content of reporting is relatively insignificant:
- Fully insured: basic plan information + Schedule
A
- Self-Insured: basic plan information
- Additional reporting required if funded through
a trust
29. www.FridayFirm.comwww.FridayFirm.com
Proposed
Form 5500
Changes
- Rules issued in 2016
- Proposed effective date would be for 2019 plan
years
- Key changes
- Small plan exception will be removed – all plans
including those with fewer than 100 covered
employees will be required to file
- New Schedule J requesting plan details including:
- Information about COBRA coverage
- Whether the plan is grandfathered
- Financial and claims information
- Answer questions about HIPAA, GINA, mental health
parity, health care reform and other mandates
- SPD and SBC compliance
- Revisions to Schedules C and H
30. www.FridayFirm.com
Association Health Plans
- Regulations issued in 2018 to expand availability of
Association Health Plans
- Rules expanded the criteria for a group or association of
employers to be considered a bona fide group or association
for purposes of MEWA rules
- 2019 court ruling vacated key provisions of AHP regulations
32. www.FridayFirm.com
www.FridayFirm.com
400 West Capitol Ave. Suite 2000 I Little Rock, AR 72201
3425 North Futrall Dr. Suite 103 I Fayetteville, AR 72703
3350 South Pinnacle Hills Pkwy. Suite 301 I Rogers, AR 72758
JOSHUA M. OSBORNE
Employee Benefits
501-370-1451
josborne@fridayfirm.com
www.fridayfirm.com/attorney/josborne