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Health Care Reform: Guidance on HRAs, Health FSAs and Cafeteria Plans

Health Care Reform News Alert: Via CBG Benefits

The IRS and Department of Labor recently issued guidance on how certain Affordable Care Act reforms apply to health reimbursement arrangements (HRAs) and health flexible spending accounts (FSAs), and other similar plans.

To help your company understand the potential impact of this guidance, below is a summary of the information that was released.

Summary of Findings

Here are a few key points that can be found within the released information:

  • A group health plan, including an HRA, used to purchase coverage on the individual market cannot be integrated with that individual market coverage. This is in regards to the annual dollar limitation or preventive services requirements within the Affordable Care Act.
  • Only cafeteria plan health FSAs are exempt from the annual limit prohibition under the Affordable Care Act.
  • Employee Assistance Programs (EAPs) are considered to excepted benefits if they do not provide significant benefits in the nature of medical care or treatment.
  • A transition rule is available for non-calendar year cafeteria plans.

How This May Impact Your Business

A summary article published by Mintz Levin on September 25th touches on one of the main points that may be of interest to employers. Here is one of the key quotes:

“The effect of the guidance is to make it impossible for any employer payment plan other than a plan that provides only excepted benefits to provide for the purchase of health coverage in the individual market.”

Yes, employers will generally be prevented from using individual accounts, such as an HRA or an FSA, to reimburse active employees for premiums on individual insurance policies purchased in the exchanges.

State-Specific Impact

There are states, such as Massachusetts, that currently allow employees to purchase of health coverage through a marketplace on a pre-tax basis with Section 125 Plans.

According to the guidance issued, these pre-tax contributions can continue until the plan anniversary occurring on or after January 1, 2014. However, at that time, the practice will no longer be allowed.

Please stay tuned to CBG Benefits as additional information is released on this subject. If you have any questions in the meantime, please contact our team at 877-332-6387.


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Posted in: Benefits and Insurance, Human Resources, Legislation

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