November 26, 2018 | IRS Regulation
Three federal agencies—the IRS, the Department of Labor, and the Department of Health and Human Services—have issued proposed regulations that would let employers fund tax-exempted health reimbursement arrangements in order to help pay for employees’ individual health insurance premiums.
A health reimbursement arrangement (HRA) is an arrangement funded by an employer that is set up to reimburse certain medical expenses incurred by employees, former employees, as well as spouses and dependents of employees. With an arrangement like this, the reimbursements are excluded from employees’ income and wages for the purpose of federal income tax and employment taxes.
As a self-insured group health plan, an HRA is an eligible employer-sponsored plan. As such, if an individual is covered by an HRA or is eligible for an HRA that’s affordable and provides required minimum value for the month, currently they will be ineligible for the premium tax credit for Exchange coverage. While IRS guidance says that an HRA is an eligible employer-sponsored plan, they have not previously provided guidance as to the circumstances in which an HRA is considered to be affordable or to provide minimum value.
The regulations proposed would allow an employer that offers traditional group health coverage to fund an HRA up to $1,800 per year for employee reimbursement of certain medical expenses, including stand-alone dental benefits or premiums for short-term insurance plans. The regs may also apply to other account-based group health plans with individual health insurance coverage.
These proposed regulations would apply to group health plans and health insurance issuers for plan years beginning on or after January 1, 2020. These are proposals only and may not be relied upon. (REG-136724-17)
Contact Filler & Associates if you want more information about HRAs for your Maine business.