May 13, 2016 – New Guidance and Clarification for Integrated HRAs

May 13, 2016 – New Guidance and Clarification for Integrated HRAs

IRS guidance released late in 2015 (Final Regulations under Section 9815 and Notice 2015-87) modified the scope of permissible integrated Health Reimbursement Arrangements (“HRAs”). The modified requirements for integration are as follows:

1. The plan sponsor of the HRA must offer group medical coverage (that is minimum essential coverage for purposes of Health Care Reform) to the employees who will participate in the HRA;
2. Enrollment in a group medical plan must be an eligibility requirement for participation in the HRA (i.e., all HRA participants must be actually enrolled in a group medical plan sponsored by the HRA plan sponsor or another employer);
3. Any dependents/spouses covered under the HRA must also be enrolled in a group medical plan;
4. The HRA may not be used to purchase individual medical insurance policies (other than policies for excepted benefits);
5. The HRA must allow participants to opt-out of coverage; and
6. If the group medical plan in which the HRA participant is enrolled does not provide minimum value (for purposes of Health Care Reform), then only limited eligible expenses are reimbursable under the HRA.

If you have an HRA that does not conform to these requirements, immediate attention may be required.  In particular, check the following language of your current HRA plan documentation:

1. Definition of Reimbursable Expense
   1. The definition of reimbursable expense cannot include premiums for individual medical insurance policies issued by a public marketplace (e.g. MNsure) or a carrier in the individual insurance market.  Such expenses cannot be reimbursed at any time.  Note, however, the HRA may reimburse premiums for supplemental types of individual insurance coverage limited to excepted benefits (e.g. dental coverage, vision coverage, and long-term care coverage).
   2. The definition of reimbursable expense cannot include medical expenses incurred by the participant’s spouse and dependents if they are not enrolled in a group medical plan.  Notice 2015-87 indicates that the spouse and dependents must be enrolled in the HRA plan sponsor’s group medical plan.  However, according to the final regulations, an HRA can be integrated with another employer’s group medical plan (i.e., the HRA participant can be enrolled in another employer’s group medical coverage).  Therefore, it is possible that the integrated HRA can reimburse expenses incurred by a spouse or dependent who is enrolled in another employer’s group medical plan.

2. Opt-Out Language
   1. Employees must have the ability to permanently opt-out of and waive future reimbursements under the HRA. However, according to the final regulations, the HRA plan sponsor may allow employees to amend their opt-out election on an annual basis, reinstating a participant’s HRA balance (as of the date the participant opted-out). If you are currently using a one-time opt-out approach, you may change this provision to allow employees to annually participate or cease participation in the HRA.

It is imperative that you actively review your plan documents to ensure they remain in compliance with Health Care Reform as the IRS continues to publish guidance on these issues.  Please contact us if you have any questions or need assistance amending your integrated HRA.