HRA Administration for Small Business - HRA Plan Docs

Wrong Question... Yes, you can have an HSA and a QSEHRA at the same time but, what you really want to know is if you can make tax free contributions to a Health Savings Account (HSA) in the same tax year you were provided a QSEHRA. That is a bit more complicated, let's jump into it.  This article was prompted by IRS Notice 2017-67 which provided administrative and procedural guidance on the QSEHRA. The notice indicated a departure from the HRA compatibility requirements which call for a deductible on the HRA equal to the qualifying high deductible health plan (HDHP) deductible. According to the guidance, the QSEHRA is not permitted to impose a deductible therefore, may be disqualifying coverage for those provided the benefit by their employer. The determination comes down to what and whom is covered by the QSEHRA. Background Under section 223, individuals who have high deductible health plan (HDHP) coverage and no other disqualifying health coverage may contribute t...

Keeping up with legislation has been difficult on churches. Over the past two years I have had dozens and dozens of difficult conversations with clergy from small, local Churches who have been tearfully concerned about their health insurance. Most have faced a series of events that has pushed their ability to maintain adequate health coverage into a death spiral. Notices of a large premium increases, that they can not afford, combined with conflicting information regarding the ability of  Churches to contribute to clergy's health insurance premiums has created a crisis. In 2016, fewer than half of the solo pastors in the U.S. received any health insurance benefits. Many small businesses and practitioners I work with had not heard of an HRA prior to the 2013 IRS guidance that attempted to prohibit them. But small Churches with solo pastors, they have been using defined contribution plans or some form of "employer payment plan" since before Revenue Ruling 61-146 was i...

Three weeks ago, we told you about the executive order the President signed (in our blog post Executive Order Seeks to Expand Use of HRAs ). The order asked the Departments of Treasury, HHS and Labor to explore how they could allow more businesses to use Health Reimbursement Arrangements (HRAs). Today, the Internal Revenue Service (IRS) issued Notice 2017-67 .  This notice provides long awaited guidance on the qualified small employer health reimbursement arrangement (QSEHRA). The QSEHRA plan is a great small business alternative group coverage. The plan was welcomed when it was signed into law in 2017 and, it overturned guidance previously issued by the Internal Revenue Service and the Department of Labor that stated that HRAs violated the ACA’s market reforms, subjecting small employers to a penalty for providing such arrangements. In this post, we will cover the notice in detail. What it means moving forward and its impact on existing plans. The Notice Today’s 59...

Our software does the initial notice for you. Employers offering a QSEHRA are required to provide all eligible employees with a notice that includes the following: The employee’s permitted amount for the year; An instruction to provide that information in any application for an Affordable Care Act (ACA) exchange premium subsidy; and A warning that the employee may be taxed under the ACA’s individual mandate, and owe income tax on QSEHRA reimbursements, unless he or she obtains “minimum essential coverage.” The IRS waived the notice requirement for 2017. For 2018, the notice requirement in in place. Our clients are pleased to know HRA Plan Docs creates the notice and delivers it with your plan documents, ready to distribute. We also provide clients with a "fillable" employee notice for new hires. The employee’s permitted amount for the year. The initial notice is distributable to all employees that will be eligible on the first day of the plan. For ne...

QSEHRA contribution limits for 2018 It is always amusing when the Service has a statutory deadline, like the October 1 deadline to provide QSEHRA participants written notice of their benefit, and releases helpful information weeks after said deadline. The IRS released the 2018 QSEHRA guidelines through Revenue Procedure 2017-58 on October 19, 2017. Luckily, HRA Plan Docs computed the increase from CPI in August so our clients were able to provide accurate employee notices. The 2018, QSEHRA contribution limits increased $200 annually for self-only employees and  $250 annually for employees with a family. An increase of roughly $16.66 per month for self-only employees and $20.83 for employees with a family. See the chart below for details: The maximum monthly allowance for 2017 Plans Employee Only $412.50 Employee w/ Dependent(s) $833.33 The maximum monthly allowance for 2018 Plans Employee Only $420.83 Employee w/ Dependent(s) $854.17

The New HRA for Qualified Small Employers The passage of the 21st Century Cures Act in December of 2016 minted a new HRA benefit, the Qualified Small Employer HRA. The law was essentially a compromise between lawmakers, who understood that small businesses that did not offer traditional group health benefits wanted to provide a non-traditional health benefit, and the Departments of Labor and Treasury, which had issued coordinated guidance in 2013 effectively barring small businesses from using existing tax law under 26 CFR 1.105-11 for tax free reimbursement of medical expenses if the plan had two or more eligible participants. The Departments contended that “old” Section 105 plans were “group health plans” and therefore subject to the ACA’s “market reforms” which apply to all group health plans. To bypass the ACA, congress wrote the “new” law, forming the QSEHRA, under 26 U.S. Code §9831, exceptions to group health plans. The Same but, Different The reimbursement p...

Executive Order Signing On October 12, 2017, the President signed an executive order asking the Departments of Treasury, HHS and Labor to explore how they can allow more businesses to use Health Reimbursement Arrangements (HRAs). How does this affect the QSE-HRA and how should you plan for your small business? Until guidance is issued from the departments, there is no impact on Qualified Small Employer HRAs. Current regulatory requirements have not been changed by the executive order. We at Plan Docs anticipate a roll-back of the guidance provided under IRS Notice 2013-54 and Technical Release 2013-03, which subjected Section 105, Self Insured Medical Reimbursement Plans, commonly referred to as HRAs, to the “market reforms” of the ACA. Should this guidance be repealed, HRA Plan Docs is prepared to immediately offer Section 105 plans for small businesses. Moreover, we will provide existing clients the option of transitioning from the QSE-HRA to a Section 105 plan at no ch...

My employees are on their spouse's work insurance. A common speed bump for employers considering a reimbursement plan is understanding how employees that have medical insurance coverage through a spouse's employer will benefit. This is called employer-sponsored coverage. The most common example: employees having coverage through a spouse. There are two "types" of major medical insurance: Individual: meaning it is purchased by a person, an individual, as opposed to an organization. Individual coverage can cover an entire family. "Individual" refers to the purchaser. Individual insurance follows the individual, it is not tied to employment. Group: meaning it is purchased by an organization and offered to employees of the organization. Group coverage follows the organization, when one leaves the organization the coverage does not follow. All group coverage is sponsored by an "employer" or organization. Most employers offering group covera...

Confused About S-Corp Reimbursement Arrangements? Everybody seems to be confused about S-Corp shareholder participation in medical reimbursement plans. There is also confusion about S-Corp shareholders deducting health insurance costs and the steps that need to be taken to allow the deduction. This post is for S-Corp shareholders, why you absolutely want to participate in your business’s reimbursement plan and how to achieve the same tax advantage as your employees. Health reimbursement arrangements are all actually a version of a Self Insured Medical Reimbursement Plan, codified in 26 CFR 1.105-11. The different acronyms associated with the plans, HRA, HRP, MRP, MERP, HIRP, et al, are not exactly legal terms, even though you will find them in Treasury guidance, these are acronyms coined by administrators, brokers, insurance carriers and even the government to distinguish them from one another. They can have different plan structures and eligible expense exclusions depending...

Yes, you can have an HRA and an HSA at the same time and it is great... Okay, but there are some rules you have to follow and some extra work for the administrator. First, if you are making tax-free contributions to an HSA, the IRS requires  that individuals have a minimum deductible on their health insurance from all sources (including HRAs and QSEHRAs) in order to make tax deductible contributions to their Health Savings Account (HSA). We call this an HRA Deductible. However, there are some expenses that can be reimbursed through the HRA without regard to an HRA Deductible. These expenses include: Insurance premiums Wellness/preventive care Expenses resulting from accidents Dental expenses Vision expenses Real World Application It is important there is no confusion between having an HSA and making contributions to an HSA. Funds from an HSA can be used to pay for the qualified medical expenses of the account holder and her dependents, even if the account holder is...

The Legal Definition The Internal Revenue Code defines medical expenses in  26 U.S. Code § 213 : (d) Definitions For purposes of this section— (1) The term “medical care” means amounts paid— (A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body, (B) for transportation primarily for and essential to medical care referred to in subparagraph (A), (C) for qualified long-term care services (as defined in section 7702B(c)), or (D) for insurance (including amounts paid as premiums under part B of title XVIII of the Social Security Act, relating to supplementary medical insurance for the aged) covering medical care referred to in subparagraphs (A) and (B) or for any qualified long-term care insurance contract (as defined in section 7702B(b)). The Internal Revenue Service (IRS) establishes guidelines for what types of medical expenses may be reimbursed tax-free through an HRA. Th...

Employee Statuses The Qualified Small Employer HRA requires that the benefit be offered to all Full-Time Permanant employees that work an average of 30 hours per week. What does that mean? How does one know if an employee has to be included? In this section we will answer those questions by defining employee statuses. Full-Time Employee A full-time employee is an individual reasonably expected to work at least 30 hours per week. For this purpose, “hours” include each hour for which an employee is paid or entitled to payment for performing duties for the employer or entitled to payment even if no work is done (e.g. holiday, vacation or sick time). Employees with variable hours may also be considered fulltime, benefits eligible employees if they work an average of 30 hours or more per week during a look-back measurement period. Temporary (short-term) employees and seasonal employees may also be considered full time. Variable Hour Employees The ACA defines an empl...

All HRA plans, from the Single Participant 105 plan to the Qualified Small Employer HRA, function in similar ways. Over the years employers have begun to realize the value of the HRA as a total replacement strategy What is a Health Reimbursement Arrangement (HRA)? There are two families of HRA, traditional Section 105 HRAs and Qualified Small Employer 9831(d) HRAs. Both are employer-funded health plans that reimburse employees tax-free for eligible out-of-pocket medical expenses, including individual health insurance premiums. The differences lie in the plan structure, various structures have evolved over the decades to comply with the constantly changing regulatory environment.  How do they work? Employers define a dollar amount they are willing to contribute to employees’ medical expenses. Employees spend money on qualified medical expenses and submit a request to be reimbursed and proof of the expense to the employer or the employer’s claim reviewer. Once approved the company re...

IRS Statement Prior to the Presidential Election “The IRS plans to reject electronically filed “silent returns” beginning in FS 2017....Silent returns filed by paper will go to the Error Resolution/Rejected Returns unit as the IRS issues Letter 12C, informing the taxpayer of the issue. If the taxpayer does not respond to the Letter 12C, the IRS will issue a notice to inform the taxpayer that the IRS estimated an ISRP and made an adjustment accordingly. If the taxpayer’s original return claimed a refund, the IRS will offset the refund with the ISRP balance. January 20, 2017 Presidential Executive Order “To the maximum extent permitted by law, the Secretary of Health and Human Services (Secretary) and the heads of all other executive departments and agencies (agencies) with authorities and responsibilities under the Act shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or require...