Beginning Jan. 1, 2020, some employers will be able to offer individual coverage HRAs (ICHRAs) to help employees pay for individual health insurance. ICHRAs were established by a final rule published on June 20, 2019, which raised questions about how existing federal rules will apply to ICHRAs.
As a result, on Sept. 30, 2019, the Internal Revenue Service (IRS) published proposed regulations on how the following federal requirements will affect ICHRAs:
- The Section 4980H employer shared responsibility rules under the Affordable Care Act (ACA)
- The federal nondiscrimination requirements in Internal Revenue Code (Code) Section 105(h).
Taxpayers generally may rely on the guidance provided in the proposed rule prior to a final rule being issued.
Comments on the proposed rule will be accepted until Dec. 30, 2019.
- Employers may begin offering health reimbursement arrangements (HRA) January 1, 2020 to employees that enroll in individual coverage. The HRA is known as “individual coverage HRAs” (ICHRA)
- The employer allowance toward the HRA may be used to reimburse for individual coverage on or off the health exchange as well as for Medicare coverage.
- Employers may also allow employees to pretax their salary reduction to pay for any premium individual coverage – (except for on the exchange).
- The offer of the ICHRA is an offer of coverage under ACA allowing an employer to avoid penalties if certain conditions are met for affordability. Also, if the offer is considered affordable it will be deemed minimum value as well.
- The affordability is based on the premium for the lowest cost single-tier silver plan in the area, minus the employer’s HRA allowance being equal to or less than the employee’s household income x .978.
September 30, 2019 | The IRS published a proposed rule on how the ACA’s pay or play rules and Code Section 105(h) nondiscrimination requirements will affect ICHRAs.
January 1, 2020 | If finalized, the proposals would take effect beginning with 2020 plan years.
Source: © 2019 Zywave, Inc.