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Health Reimbursement Arrangements (HRAs)
Access to Health Reimbursement Arrangements for Self-Employed #1 Legislative Priority
In the closing days of the 113th Congress, Representatives Boustany (R-LA) and Thompson (D-CA) introduced H.R. 5860, the Small Business Healthcare Relief Act of 2014, which would allow for standalone health reimbursement arrangements (HRAs) for small employers (49 or less employees).
Health Reimbursement Accounts have historically been a very powerful and effective tool for the small business community. HRA’s allows small business owners to do the right thing by helping provide financial assistance to their employees for qualified health care expenses. Established in 2002, Health Reimbursement Arrangements (HRAs) or Health Reimbursement Accounts are employer-funded, tax-advantaged employer health benefit plans that reimburse employees for out-of-pocket medical expenses and individual health insurance premiums. Health Reimbursement Accounts are funded solely by the employer, and cannot be funded through employee salary deductions. The employer sets the parameters for the Health Reimbursement Accounts, and any unused funds remain with the employer. There are only two requirements to establish an HRA plan: 1) the plan must be in writing; 2) the plan must be non-discriminatory (i.e. each employee receives the same reimbursable rate).
In September 2013, through Technical Release No. 2013-03 the Departments of Treasury, Health and Human Services, and Labor, significantly restricted the use of HRAs by small employers, stipulating that an employer that offers an HRA to two or more employees, but does not offer a group health care plan, is not compliant with annual limit regulations and other health insurance market requirements and therefore, the business would be subject to significant penalty.
H.R. 5860 would reverse the Technical Release for employers with 49 or less employees that offer an HRA to their employees. While the legislation will have to be re-introduced in the 114th Congress, the NASE remains steadfast in its determination to have HRAs unrestricted to the self-employed and micro-business community as way in which employers can help financially contribute to their employees’ health care costs.