IRS Provides New Guidance on HRAs

 

From UnitedHealthcare…

December 23, 2013

Internal Revenue Service (IRS) Notice 2013-54 provides guidance on the application of certain provisions of the Affordable Care Act (ACA) for health reimbursement accounts (HRAs), including HRAs integrated with a group health plan. The notice also confirms prior guidance clarifying that an employee cannot use funds from a stand-alone HRA to purchase individual health insurance on a tax-favored basis.

An HRA is considered integrated with a group health plan if, under the terms of the HRA, an employee (or former employee) is permitted to permanently opt out of and waive future reimbursements from the HRA at least annually and, upon termination of employment, either the remaining amounts in the HRA are forfeited or the employee is permitted to permanently opt out of and waive future reimbursements from the HRA.

The table below provides additional details regarding an HRA integrated with a Minimum Value plan versus a Non-Minimum Value plan:

HRA Integrated with a Minimum Value Plan HRA Integrated with a Non-Minimum Value Plan
The customer offers a group plan that provides minimum value. The customer offers a group plan, regardless of whether it provides minimum value.
The employee receiving the HRA actually enrolls in the group health plan that provides minimum value. The employee receiving the HRA actually enrolls in the group health plan.
The HRA is only available to employees enrolled in a group health plan that provides minimum value The HRA is only available to employees enrolled in a group health plan.
The employer has the option for the HRA reimbursements to include 213(d) expenses (a more robust reimbursement option than if the plan did not meet minimum value). HRA reimbursements are limited to copayments, coinsurance, deductibles, non-HRA group health plan premiums and non-Essential Health Benefits.
The employee is able to permanently opt out from receiving reimbursements from any rollover account balances under the HRA at least annually, and upon termination of employment, any remaining HRA balance is automatically forfeited or the employee is permitted to permanently opt out from receiving any reimbursements.

The benefits provided by the HRA generally will constitute minimum essential coverage; therefore, the HRA opt out is a requirement. If an employee is enrolled in an HRA, they would not be eligible to qualify for a subsidy if purchasing coverage on the Exchange.  If an employee opts out of the HRA, if permissible, they could be eligible for a subsidy.

These new requirements are meant to discourage customers from adopting a lean plan and then supplementing it with HRA dollars.

  • For this reason, UnitedHealthcare will not allow clients to set-up an HRA with a UnitedHealthcare Preventive plan.
  • The opt-out requirement is fulfilled through an annual Open Enrollment by allowing a member to opt out of both medical and the HRA.
  • UnitedHealthcare will provide standard Summary Plan Description (SPD) amendment language to support the HRA opt-out requirement.
  • Please note that processes may differ by entity; additional details will be forthcoming.
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