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- Update to Proposed HRA Expansion - 11/19/18
- A new IRS notice addresses issues under the Code concerning the requirements of Section 4980H (employer mandate) and Section 105(h) (non-discrimination tests). The IRS is working through disparities of the new HRA rules and the employer mandate rule. The employer mandate requires employers to offer affordable coverage that meets a minimum value (comprehensive benefits set at 60 percent actuarial value).
Below are the primary highlights of the notice that we feel are important to note.
Application of the Employer Mandate and Applicable Large Employer (50 or more employees) that offers an Integrated HRA
Affordability - The IRS anticipates that the existing safe harbors under the Employer Mandate (W-2 Safe Harbor, Rate of Pay Safe Harbor, and Federal Poverty Line Safe Harbor) will continue to apply in conjunction with the following:
- Location Safe Harbor - What is deemed affordable is based on the self-only lowest cost silver plan offered on the exchange and is based on where the primary site of employment is rather than on where the employee resides.
- Calendar/Non-Calendar Year Safe Harbors - If the group's plan year falls on January 1st, the employer can use the cost of the lowest cost silver plan for the prior plan year, whereas if the groups plan year falls midyear (typically 7/1), the group can use the cost of the silver plan in existence on the first month of the plan.
- Uniformity Test - In order to meet nondiscrimination rules, HRA amounts cannot be varied for different employee classes. The IRS expects that as long as the employer offers uniform contributions to all participants in a particular class, they would meet the 105 rules.
- Age Variance - An exception to the uniform contribution rule above is that there can be variation within a class due to age so long as the variation coincides with the age-based cost of the individual insurance plan.
- Federal Agencies Propose Expansion of HRAs - 10/26/18
- On October 24, 2018 the DOL, IRS, and HHS released proposed regulations broadening HRA rules which would allow employers to offer HRAs that reimburse an employee's individual insurance premiums or a standalone HRA that reimburses medical expenses of up to $1,800 a year. This would go into effect January 1, 2020.
The proposed regulations would allow for the following two types of HRAs:
Premium Reimbursement HRA (PRA): The PRA would reimburse employees for the cost of individual insurance plans.
Standalone HRA: Standalone HRAs are not integrated in a group health plan or attached to an individual insurance policy.
If this proposal goes into effect, employers looking to incorporate these new HRA types into their benefits offerings may need to amend their cafeteria and ERISA plan documents and provide a notice to advise employees that electing a PRA may prevent them from receiving an exchange premium tax credits (PTC). As always, Further will ensure that we have supporting materials available on this site if we administer these new accounts to any groups.
- House Passes Two Bills Modernizing HSA and FSA Rules
On July 25, 2018, the House passed two bills that would modernize health savings account (HSA) and flexible spending account (FSA) rules and expand consumers' ability to cover their health care expenses.
The Restoring Access to Medication and Modernizing Health Savings Accounts Act (H.R. 6199) and the Increasing Access to Lower Premium Plans and Expanding Health Savings Accounts Act (H.R. 6311), if signed into law, would:
- Allow individuals with bronze or catastrophic coverage through government-approved health insurance plans to contribute to an HSA.
- Allow unused FSA funds to roll over to the following year. Current IRS rules limit individuals to carry forward up to $500 from an FSA into the following year.
- Broaden the qualified medical expense definition to include over-the-counter drugs, menstrual care products, and certain sports and fitness expenses.
- Increase the contribution limits for HSAs.
If these bills become law, it could significantly increase the popularity and usage of HSAs. Additionally, studies show that the popularity of medical FSAs is declining. If these bills become law, it could reverse that trend.
Both pieces of legislation are expected to go to the Senate for vote later this year. Before they become law, President Donald Trump will need to sign.
Further will continue to monitor events and provide updates.
- Proposed Legislation To Increase HSA Contribution Limits - 11/7/17
- Senators Orrin Hatch (R-Utah) and Kevin Brady (R-Texas) introduced legislation to extend Affordable Care Act (ACA, also known as Obamacare) insurance subsidies through 2019. The legislation also proposes increasing the maximum health savings account (HSA) contribution limits to the plan deductible or out of pocket limit.
At this time, contributions limits have not changed for HSAs; the current 2018 HSA contributions limits remain at $3,450 for single and $6,900 for family.
Timing of when Congress will vote on the legislation is to be determined. SelectAccount is continuing to monitor events.
- On Oct. 12, President Donald Trump signed an executive order that directs federal regulators to issue new rules regarding health reimbursement arrangements (HRAs), association group health plans, and short-term health policies. President Trump has asked agencies to issue new regulations broadening the use and availability of HRAs, specifically allowing for non-group HRAs. The agencies have 120 days to issue proposed regulations.
Currently, the existing rules surrounding HRAs have not changed. Further is continuing to monitor events.
- IRS Releases 2019 FSA and TRA Limits - 11/15/2018
- Issued Thursday November 15, 2018 as per IRS publication rp-18-57, the IRS has raised the Flexible Spending Account (FSA) limit to $2,700 for 2019. Additionally, Transportation Reimbursement Account (TRA) expense limits for parking and transit have been set at $265/month.
For groups that already set their contribution limits to the 2018 amount ($2,650), Further will automatically update that amount to the new 2019 limit of $2,700 unless notified otherwise within the next 30 days.
- IRS Reinstates $6900 HSA Contribution Limit - 4/27/2018
- Overview: The IRS released guidance allowing 2018 family HSA contribution limits to again be $6,900.
On March 2, 2018, the IRS released guidance which lowered due to inflation the 2018 HSA contribution limit for family coverage by $50 to $6,850. This surprised a lot of people and could have led to tax penalties for individuals who had already contributed more than the new limit or individuals who didn’t realize the limit had changed and fail to change their contributions to the new lower limit by the end of 2018. However, this new guidance removes any potential tax penalties for 2018.
- Taxpayers can continue to treat the family HSA contribution limit as $6,900.
- If a taxpayer has received a corrective distribution they may, but are not required, to repay the contribution to the HSA up to the $6,900 limit.
- Maryland Passes Male Sterilization Exemption for HSAs - 04/18/18
- On Tuesday, April 10 state legislation was officially changed (enacted) in Maryland exempting HDHP health plans from the male sterilization coverage. The original law mandated that as of 1/1/18 all plans in MD cover male contraceptives at 100%. This made all plans incompatible with HSAs because only preventative services can be covered at 100%. This change to the law provid s an exception from this rule for HDHP plans so that those members would still be able to contribute to their HSAs.
The final legislation can be viewed here.
- On Dec. 20, Congress approved the final version of the tax bill. Before becoming law, the bill must be signed by President Donald Trump. If signed into law, this legislation impacts fringe commuter benefits. Meaning, as of January 1, 2018, employers will no longer receive a tax deduction for providing parking or transit pass contribution assistance to employees. Employees who pay for their own transportation cost are still permitted to use pre-tax income on those expenses.
Further will continue to monitor events surrounding the tax bill