While we continue to wait for the finalized rules for Individual Coverage HRAs (ICHRA) from the Department of Labor, another piece of the puzzle has been set into motion. The IRS has posted an agenda item for November to propose regulations surrounding various provisions of the Internal Revenue Code to accommodate President Trump's plan to allow employers to use health reimbursement accounts to pay for individual premiums and medical expenses.
Here's what that means.
As part of President Trump's executive order, which also expanded upon short-term limited duration plans and association plans in the wake of failed attempts to repeal the Affordable Care Act, this third push for greater usability for health reimbursement arrangements results in two new HRAs: the Individual Coverage HRA (ICHRA) and the Excepted Benefit HRA (EBHRA).
For background, a Health Reimbursement Arrangement (HRA) is a vehicle that allows employers to help employees pay for medical expenses with tax-advantaged dollars. The most common types of HRAs are called Section 105 HRAs, named after the Internal Revenue Code Section 105, which created and regulates most types of HRAs today.
The ICHRA allows employers of any size to reimburse at any rate for premiums and medical expenses and scale that benefit across nine different classes, expanding upon the benefits of its predecessor, the QSEHRA, and bringing those benefits to a larger pool of employers.
The EBHRA offers reimbursement opportunities to employees that choose not to participate in the group health plan offered by their employer.
A comments period earlier this year provided further insights as the departments collaborate together and Take Command Health shared proprietary research to help shed light on the topic . While the Department of Labor is slated to release a final ruling in June on this topic, the IRS will have a chance to weigh in during their scheduled meeting in November before the two new HRAs hit the market in January 2020.
The next steps from the Department of Labor and the IRS will signify their support surrounding the executive order, but efforts surrounding greater adaption of health reimbursement arrangements, like the QSEHRA, has strong support from both sides. In other words, this isn't going away. (And that's a good thing, if you ask us!)
What happens next?
The Trump administration estimates that these new HRAs and their benefits will reach up to 10 million Americans.
While we won't know the final details until the finalized rules from the Department of Labor are announced this coming month and the tax code changes from the IRS are made in November, there's one thing we can bank on. Starting in January 2020, a major shift is going to redefine how group plans are administered forever and we are working on an easy to use platform with innovative tools to help make this transition a smooth one.
Is your company or client going to be a part of this exciting change? Chat with our team with any questions you may have about these new, tax-friendly benefits or check out our new ICHRA Guide for more information on its background, setup process, requirements, and rules.
We will keep this page updated as more information comes in. Stay tuned!