President Barack Obama has signed into law the 21st Century Cures Act which allows small employers (those with fewer than 50 full-time employees who don’t offer a group health plan) to offer “qualified small employer health reimbursement arrangements” to reimburse employees for qualified medical expenses, including individual health insurance premiums, for years after Dec. 31, 2016.
The 21st Century Cures Act exempts so-called qualified small employer Health Reimbursement Accounts or HRAs from the ACA’s market reforms. To be a qualified small employer HRA, the arrangement must:
- Be funded solely by an eligible employer without salary reduction contributions
- Provide, after employee provides proof of coverage, payment or reimbursement of qualified medical expenses (which generally includes individual health insurance premiums) incurred by the employee or their family members
- Limit annual payments and reimbursements to $4,950 per employee or $10,000 per family (prorated where coverage is less than the entire year)
- Be provided on the same terms to all eligible employees
An employer funding a qualified small employer HRA must provide a written notice to each eligible employee that includes the following information:
- A statement regarding the maximum dollar amount of payments and reimbursements that may be made for the year
- A statement that the employee should provide information regarding their permitted benefit to any Health Insurance Marketplace to which the employee applies for advance payment of the premium tax credit
- A statement that if the employee is not covered under minimum essential coverage for any month, the employee may be subject to the individual mandate penalty for such month and reimbursements under the HRA may be included in gross income.
Effective for years beginning after Dec.31, 2016, the notice generally must be provided no later than 90 days before the beginning of the year in which the HRA is funded—or the date on which the employee is first eligible.
While failure to provide the notice may generally result in a penalty of $50 per employee, penalty relief is available with respect to years beginning after Dec. 31, 2016 as long as the notice is provided no later than 90 days after Dec. 13, 2016.
In addition, an employee’s total permitted benefit for the year must be reported on his or her Form W-2.
For individualized guidance on funding a qualified small employer HRA, contact your Professional Insurance Programs benefits team at 800-637-4676.
Source: HR360, Inc.
