Federal Guidance on HRAs, Health FSAs and Other Employer Funding Arrangements Under Health Care Reform

October 2013

On September 13, 2013, the Internal Revenue Service, U.S. Department of Labor and U.S. Department of Health and Human Services, collectively, issued guidance (the "Health Funding Guidance") on the application of two of the market-based health care reforms under the Affordable Care Act ("ACA") to health reimbursement arrangements ("HRAs"), health flexible spending arrangements ("Health FSAs"), employer reimbursement plans and employee assistance programs ("EAPs"). The new guidance is effective for plan years of group health plans beginning on or after January 1, 2014.

Basics of the New Guidance

The new Health Funding Guidance will impact employer account-based health arrangements (HRAs, Health FSAs and employer reimbursement plans) and EAPs in the following ways starting with the plan year beginning in 2014:

  • HRAs generally will need to limit coverage to employees enrolled in other group health plan coverage. Specific rules for the "integration" of HRA benefits with group health plan benefits will need to be met.
  • Employer funding of Health FSA benefits will need to be limited to not more than the greater of $500 or the amount funded by the employee through pre-tax salary reduction elections.
  • Employers will not be able to reimburse employee premiums for individual health insurance on a tax free basis without violating the new health care market reform rules.
  • EAPs will generally still be permitted, so long as they do not provide significant medical care or treatment benefits.

To continue reading about these key elements from the Health Funding Guidance in greater detail, please click here.