On Sept. 13, 2013, the Internal Revenue Service (IRS) and the Department of Labor (DOL) issued technical guidance on how certain market reforms under the Affordable Care Act (ACA) apply to health reimbursement arrangements (HRAs), health flexible spending accounts (FSAs) and other similar arrangements.
This guidance is contained in IRS Notice 2013-54 and DOL Technical Release 2013-03. The Department of Health and Human Services (HHS) is also issuing guidance to show that it agrees with the IRS' and DOL's interpretation.
The guidance applies for plan years beginning on or after Jan. 1, 2014, but can be applied for all prior periods.
The ACA requires non-grandfathered group health plans to cover certain preventive care services without imposing any cost sharing. For plan years beginning on or after Jan. 1, 2014, the ACA prohibits group health plans from placing annual dollar limits on the coverage of essential health benefits.
Prior guidance provided that an HRA integrated with other group health coverage is not required to satisfy the annual limit restrictions if the other coverage alone satisfies the ACA's annual limit restrictions. The latest guidance includes the following points:
The IRS' and DOL's guidance includes two ways for an HRA to be considered integrated with a group health plan for purposes of the annual dollar prohibition and the preventive care services requirements. Under either method, the HRA and the other group coverage are not required to have the same plan sponsor or the same plan document, or to file a single Form 5500 (if applicable).
Under both methods, an employee must be permitted to permanently opt out of and waive future reimbursements from the HRA at least annually. This opt-out feature is required because the HRA's benefits generally will constitute minimum essential coverage and would disqualify an individual from claiming the ACA's premium tax subsidy.
Benefits under an EAP are considered to be excepted benefits that are not subject to the ACA's market reforms, but only if the program does not provide significant benefits in the nature of medical care or treatment.
For purposes of the premium tax subsidy, the affordability and minimum value requirements do not apply if an employee enrolls in any employer-sponsored minimum essential coverage, including coverage provided through a cafeteria plan, an employer payment plan, a health FSA or an HRA, but only if the coverage does not consist solely of excepted benefits. If an employee enrolls in any employer-sponsored minimum essential coverage, he or she is ineligible for the ACA's premium tax subsidy.
An HRA that has fewer than two participants who are current employees on the first day of the play year (for example, a retiree-only HRA) is also considered minimum essential coverage. As a result, a retiree covered by a stand-alone HRA for any month will not be eligible for a premium tax subsidy for that month.
Beginning in 2014, individual coverage through an Exchange cannot be reimbursed or paid for under a cafeteria plan. For cafeteria plans that as of Sept. 13, 2013 operate on a plan year other than a calendar year, this restriction will not apply before the first plan year that begins after Dec. 31, 2013. However, individuals may not claim a premium tax subsidy for any month in which they are covered by an individual plan purchased through an Exchange as a benefit under a cafeteria plan.
This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.
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