Non-integrated health reimbursement arrangements (whatever they are called) are subject to $36,500 per-participant per-year penalty

Nancy K. Campbell • March 19, 2014

Last fall the IRS and DOL issued nearly identical guidance, IRS Notice 2013-54 and DOL Technical Release 2013-03, explaining how certain Health Care Reform Act rules apply to health reimbursement arrangements (“HRAs”).  Notice 2013-54 is not good news for most HRAs, also called medical expense reimbursement plans (“MERPs”).  Executive physical plans are often structured as HRAs, so they too may be in trouble.  Notice 2013-54 is generally effective for plan years beginning on or after January 1, 2014.

Under Notice 2013-54, most HRAs must be integrated with other group health coverage in order to avoid a $100 per-participant per-day penalty.  This equates to a $36,500 per-participant per-year penalty.

Employers may still offer retiree-only HRAs and “excepted benefit” HRAs without integrating such HRAs with other coverage because those two types of HRAs are exempt from the Health Care Reform Act. IRS Notice 2013-54 indicates that all other HRAs must use one of two methods to integrate with other group health plan coverage in order to satisfy the annual dollar-limit prohibition and requirement to provide first dollar preventive care.  Both of these methods require that the HRA be limited only to employees who are enrolled in the integrated non-HRA group health coverage.

  • The first method, called the “ minimum value not required method ,” requires that the HRA reimburse only co-payments, co-insurance, deductibles and premiums under the non-HRA group coverage, or reimburse medical care other than essential health benefits.
  • The second method, called the “ minimum value required method ,” does not have any use restrictions, as does the first method, but requires that the non-HRA coverage be “minimum value.”

The surprising news is that neither method requires that the HRA and non-HRA coverage have the same sponsor. This means an employer may “integrate” its HRA with another employer’s non-HRA coverage. Both methods also require that employees be allowed to permanently opt-out of HRA coverage and, upon termination of employment either forfeit their HRA balance or permanently opt-out of coverage.

Ideally, HRAs should have been amended before the 2014 plan year to comply with one of these integration methods, both of which have very detailed requirements.  The $100 per-participant per-day penalty started accruing on January 1, 2014 for non-integrated HRAs.  Employers who have not yet integrated their HRAs may wish to amend their plans as soon as possible to integrate and may wish to consider self-reporting any applicable penalties.

For more information on how the Health Care Reform Act impacts account based health plans such as HRAs and cafeteria plans, see IRS Notice 2013-54 and the Snell & Wilmer 2013 End of Year Plan Sponsor “To Do” List  Part 2 – Health and Welfare.

Employee burnout: what it is and how to prevent it

By Mardy Gould • May 24, 2024
Employee burnout has become an epidemic in today’s modern workplace. So much so that the World Health Organization (WHO) officially recognizes it as an “occupational phenomenon.”1 While many used to consider mounting workplace stress an individual employee problem, these days, it’s become an employer’s responsibility to prevent burnout before it hurts productivity and business performance—not to mention your employees’ physical and mental health. Luckily, you can prevent burnout from affecting your workforce in several ways. This article will explore the causes and signs of employee burnout and the steps you can take to create a positive work environment where employees feel safe from toxic stress levels.

Form 720 and PCORI fee FAQs

By Mardy Gould • May 23, 2024
If you're a small business owner, you may have heard of the acronym PCORI and the fees that come with it. But what is PCORI, and how does it apply to your organization? Under the Affordable Care Act (ACA), sponsors of self-insured health plans must pay a fee to fund the federal Patient-Centered Outcomes Research Institute (PCORI). PCORI is an independent organization the ACA created to conduct research to help healthcare consumers make better decisions for their specific needs and outcomes. It also performs research related to clinical effectiveness. Employers offering a self-insured medical reimbursement health plan, such as a health reimbursement arrangement (HRA), must pay this fee by July 31 each year via Form 7201. This fee was initially set to expire in 2019, but Congress extended it through September 30, 20292, due to the Further Consolidated Appropriations Act of 20203.
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