Although the fate of the Affordable Care Act (aka Obamacare) is not yet clear, thanks to the passing of the 21st Century Cures Act at the end of 2016, employers with fewer than 50 employees can now start funding stand-alone health reimbursement accounts (HRAs) again. Employees can use HRAs to pay for medical expenses, including health insurance coverage on the Obamacare health insurance exchange market.
Until this year, employers were not allowed to offer stand-alone HRAs under the Affordable Care Act because they didn’t meet credible coverage rules. Now employers can restart stand-alone HRAs, and if they failed to halt them despite the Obamacare mandates, they will also receive retroactive penalty relief. However, there are some new regulations related to HRAs that business owners should be aware of including:
- A new limit to annual employer contributions of $4,950 for employee-only coverage and $10,000 for family coverage.
- Employees cannot contribute to these HRA accounts, only employers can.
- HRA funds can be used by employees to pay for insurance premiums or bills from physicians.
- The Obamacare premium tax credit will be reduced dollar for dollar by the HRA amount if an employee uses both.
- Any HRA reimbursements for health insurance purchases which fail to satisfy the “minimum essential coverage” requirements of Obamacare for will be considered income for employees.
For more information about the rules related to the reintroduction of HRAs, please review the Department of Labor fact sheet here.