More Guidance on HRAs Integrated with Individual Health Insurance

November 30, 2018

We recently released an Update summarizing new proposed regulations that would expand the usability of health reimbursement arrangements (HRAs) if certain conditions are met. The proposed rules would establish two new types of HRAs that would be available to employers of any size and would permit HRAs that are integrated with individual health insurance coverage (ICHRAs), subject to certain conditions. If finalized, the proposed rules would be effective for plan years beginning on or after January 1, 2020.

The IRS has now also issued IRS Notice 2018-88 inviting comments regarding application of the employer shared responsibility (mandate) rules and the self-insured health plan Code section 105(h) nondiscrimination rules to ICHRAs. The notice proposes regulatory positions and requests comments on various issues, but it does not provide guidance on which taxpayers may rely.

  • Employer Shared Responsibility – The notice clarifies the expected application to ICHRAs of certain employer shared responsibility rules (which were not addressed in the proposed regulations) and describes several potential affordability safe harbors. ICHRAs would be considered eligible employer-sponsored plans, so an applicable large employer (ALE) could count ICHRA offers toward the 95% threshold for avoiding employer mandate penalties.
  • Nondiscrimination – Because the proposed regulations would allow employers to limit offers of ICHRAs to certain classes of employees and to vary contribution amounts among the classes, the IRS anticipates issuing guidance providing that an ICHRA would not fail to meet the self-insured plan nondiscrimination requirement for uniform employer contributions so long as the same terms and maximum dollar limit apply to all employees within a particular class. However, an employer generally could increase ICHRA contributions for older participants commensurate with age-based premium increases without violating the uniform contribution rule.

While the proposed ICHRA approach may not fit the benefit strategies for many employers, it may be attractive to those employers and employees who are seeking a more defined contribution approach to health care coverage. Employers interested in adopting ICHRAs effective in 2020 will want to stay tuned for more information on these proposals. Conner Strong & Buckelew will provide alerts and updates as new information becomes available. Should you have questions, contact your Conner Strong & Buckelew account representative toll free at 1-877-861-3220. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.