New HRA Option For Small Employers

Effective January 1, 2017 the 21st Century Cures Act alters the way certain small employer health reimbursement arrangements (HRAs) are treated under the Affordable Care Act.

Under the provision, employees may use qualifying HRAs to purchase coverage in the individual market. These arrangements will no longer be considered “group health plans” and, with the exception of the Cadillac tax, will not be subject to the ACA’s requirements and/or limitations for group plans (i.e., any of the market reforms).

This HRA relief is limited to small employers with fewer than 50 full-time employees that do NOT offer a group health plan to any of their employees. Qualifying HRAs must:

  • Be offered on the same terms to all eligible employees
  • Be funded solely by the employer (i.e., no salary reduction contributions)
  • Provide payment or reimbursement for medical care expenses (with such payments/reimbursements capped at $4,950 per year for an HRA covering only the employee, and $10,000 if the arrangement covers the employee and his/her family)