Health Reimbursement Arrangements

On December 13, President Obama signed into law the “21st Century Cures Act.”  In addition to providing a medical innovation package that funds medical research, accelerates cutting-edge treatments for rare diseases, and makes significant reforms to the mental health system, the Act also allows small employers to provide Health Reimbursement Arrangements (HRAs) to their employees without facing penalties for failing to satisfy certain Affordable Care Act (ACA) requirements.

A qualified small employer HRA is one that satisfies the following requirements:

1. It is maintained by an eligible employer.
   1. An eligible employer is an employer that is not an ALE – i.e., employs < 50 employees — and does not offer a group health plan to any of its employees.
2. It is provided on the same terms to all eligible employees.
   1. An eligible employee is any employee of an eligible employer, except that the arrangement may exclude from consideration employees who haven’t completed 90 days of service, employees who haven’t attained age 25, part-time or seasonal workers, employees covered in a collective bargaining unit, and certain nonresident aliens.
3. It is funded solely by an eligible employer, and no salary reduction contributions may be made under the HRA.
4. It provides, after the employee provides proof of coverage, for the payment of, or reimbursement of, an eligible employee for expenses for medical care (as defined in Code Sec. 213(d)) incurred by the eligible employee or the eligible employee’s family members (as determined under the HRA’s terms) and
5. The amount of payments and reimbursements do not exceed $4,950 ($10,000 in the case of an arrangement that also provides for payments or reimbursements for family members of the employee). For any year beginning after 2016, the above dollar amounts are subject to cost of living increases. For employees who are covered by a qualified arrangement for less than an entire year, the above dollar amounts are prorated.

There are additional rules related to providing written notices to employees .