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New Guidance on Applicability of ACA’s Market Reforms to Family HRAs

Non-Compliant HRAs May Be Subject to Significant Penalties

The U.S. Departments of Labor, Health and Human Services, and Treasury have published new FAQs clarifying how family HRAs (HRAs available to reimburse the medical expenses of an employee’s spouse and/or dependents) can be integrated with other group health plan coverage to satisfy the market reforms of the Affordable Care Act (ACA).

Background
With the exception of qualified small employer HRAs, retiree-only HRAs, and HRAs consisting solely of excepted benefits, HRAs are considered group health plans that do not comply with the group market reform provisions of the ACA. Thus, stand-alone HRAs and HRAs used to purchase individual market coverage may be subject to a $100 per day excise tax per applicable employee, unless they are properly “integrated” with an underlying group health plan in accordance with agency guidance, as modified by IRS Notice 2015-87.

Q&A #4 of Notice 2015-87 clarifies that an HRA available to reimburse the medical expenses of an employee’s spouse and/or dependents (a family HRA) may not be integrated with self-only coverage under the employer’s non-HRA group health plan. As a result, questions have arisen regarding the integration of a family HRA in cases in which the employee is enrolled in self-only coverage and the employee’s spouse and dependents are enrolled in a non-HRA group health plan sponsored by the spouse’s employer.

New Guidance
The new FAQs make clear that a family HRA may be integrated with:

  • A non-HRA group health plan sponsored by the employer of the employee’s spouse that covers all of the individuals covered by the family HRA, so long as that non-HRA group health plan otherwise meets the applicable integration requirements (referred to as a “qualifying non-HRA group health plan”). For this purpose, an employer may rely on the reasonable representation of an employee that the employee and other individuals covered by the family HRA are also covered by another qualifying non-HRA group health plan.
  • A combination of coverage under other qualifying non-HRA group health plans, provided that all of the individuals who are covered under the family HRA are also covered under other qualifying non-HRA group health plan coverage. For example, a family HRA covering an employee, spouse, and one dependent child may be integrated with the combination of (1) the employee’s self-only coverage under the non-HRA group health plan of the employee’s employer, and (2) the spouse and dependent child’s coverage under the non-HRA group health plan of the spouse’s employer, provided that both non-HRA group health plans are qualifying non-HRA group health plans.

Click here to read the FAQs in their entirety.

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