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Certain Small Employer HRAs Exempt From ACA Market Reforms

A new law allows certain small employers–those with fewer than 50 full-time equivalent employees who do not offer a group health plan–to offer new “qualified small employer health reimbursement arrangements” to reimburse employees for qualified medical expenses, including individual health insurance premiums, for years after December 31, 2016. The law also includes a notice requirement for these new HRAs.

Qualified Small Employer HRAs
Qualified small employer health reimbursement arrangements (HRAs) are exempt from the ACA’s market reforms. To be considered a qualified small employer HRA, the arrangement generally must:

  • Be funded solely by an eligible small employer without salary reduction contributions;
  • Provide, after an eligible employee provides proof of coverage, for the payment or reimbursement of qualified medical expenses (which generally includes individual health insurance premiums) incurred by the employee or his or her family members;
  • Limit annual payments and reimbursements to $4,950 per employee or $10,000 per family (these amounts are prorated when coverage is for less than the entire year); and
  • Be provided on the same terms to all eligible employees.

Note: Large employers and employers who offer a group health plan are not eligible to offer qualified small employer HRAs.

Notice Requirement
An employer funding a qualified small employer HRA for any year must provide a written notice to each eligible employee that includes the following information:

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