Health Reimbursement Arrangements (HRAs)

On June 20, 2019, the Internal Revenue Service, the Department of the Treasury, the Department of Labor and the Department of Health and Human Services issued final rules regarding health reimbursement arrangements (HRAs) and other account-based group health plans. Specifically, the final rules allow HRAs and other account-based group health plans to be integrated with individual health insurance coverage or Medicare, if certain conditions are satisfied (an individual coverage HRA). The final rules also set forth conditions under which certain HRAs and other account-based group health plans will be recognized as limited excepted benefits (an excepted benefit HRA).

More Information:

  • Final Regulation: PDF
  • Individual Coverage HRA Model Attestations: PDF | DOCX
  • Individual Coverage HRA Model Notice: PDFDOCX
  • Frequently Asked Questions (FAQs): PDF
  • News Release: IR-2019-129
  • Notice: PDF

Employer Shared Responsibility Provisions, Certain Nondiscrimination Rules and Individual Coverage HRAs

On November 19, 2018, the IRS and the Department of the Treasury issued Notice 2018-88 describing the application of the employer shared responsibility provisions in section 4980H of the Internal Revenue Code (Code) to an applicable large employer that offers an individual coverage HRA, the application of certain nondiscrimination rules in section 105(h) of the Code to certain individual coverage HRAs, and potential safe harbors for those provisions. The IRS and the Department of the Treasury also requested comments on the issues addressed in Notice 2018-88.  On September 30, 2019, the IRS and the Department of the Treasury issued proposed regulations clarifying the application of the employer shared responsibility provisions in Code section 4980H and the nondiscrimination rules in Code section 105(h) to individual coverage HRAs, and providing proposed safe harbors for the application of those provisions to individual coverage HRAs, with certain changes compared to the potential safe harbors described in Notice 2018-88. Generally, taxpayers are permitted to rely on the proposed regulations.

More Information:

Questions and Answers about Individual Coverage HRAs and Safe Harbors

The proposed regulations under Code section 4980H that were issued on September 30, 2019 provide safe harbors for determining whether an offer of an individual coverage HRA pursuant to the June 2019 final rules is an offer of minimum value, affordable coverage for purposes of the employer shared responsibility provisions. These regulations are proposed to apply for periods beginning after December 31, 2019. Under the proposed regulations, which may be relied upon for periods during any plan year of an individual coverage HRA beginning before the date that is six months following the publication of any final regulations, an individual coverage HRA that is considered affordable under the applicable safe harbor(s) provides minimum value. Proposed Treas. Reg. § 54.4980H-5(f)(3).

Q. How does an employer determine if an offer of an individual coverage HRA is considered affordable for purposes of the employer shared responsibility provisions?

A. Whether the offer is affordable for purposes of the employer shared responsibility provisions is based on the lowest cost silver plan for self-only coverage provided for the residence of an employee, or, under the location safe harbor, an employee's primary site of employment. An additional safe harbor allows an employer to determine affordability of an individual coverage HRA with a calendar year plan year using the lowest cost silver plan for self-only coverage for January of the prior year. For an individual coverage HRA that does not have a calendar year plan year, the employer may determine affordability of the HRA using the lowest cost silver plan for self-only coverage for January of the current year. Regulations under Code section 36B (PDF)  provide similar rules referencing the lowest cost silver plan for self-only coverage for the location of an employee's residence for determining the employee's eligibility for a premium tax credit if the employee is offered an individual coverage HRA.

Q. For any location and year, how can an individual or an employer determine the lowest cost silver plan for self-only coverage for a particular month?

A. Individuals and employers may use the Employer Lowest Cost Silver Plan Premium Look-up Table to determine the lowest cost silver plan for any location, for determining if an employer's offer of an individual coverage HRA is affordable either for purposes of whether an individual qualifies for the premium tax credit under Code section 36B, or for purposes of whether the employer's offer of the individual coverage HRA satisfies a safe harbor under the proposed regulations under Code section 4908H.