Section 105

HRA’s Health Reimbursement Accounts Section 105 Plans
MERP
ICHRA Individual HRA

What is HRA’s – Health Reimbursement Accounts

HRA’s – Health Reimbursement Accounts  allow an  employer to pay or  Self Fund say by using a Ben E Lect Program  and possibly save thousands of $$$, for his and the employees uninsured medical care  for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. and deduct them.  TASC * (§IRC §213 (d), IRS Publication 502 Allowable Medical Expenses   Internal Revenue Code (IRC) §105 Publication 969

There are also NEW  provisions to allow reimbursement for Individual Policies purchased by employees.

What is Section 105 MRP Medical Expense Reimbursement 

 

Under ACA/Obamacare  only reimbursement of medical insurance premiums and qualified “preventative care” are allowed.    This puts a huge kibosh on the otherwise huge tax savings for small business entrepreneurs. … The co-pays, deductibles, and other non-covered medical is still allowed by the section 105 MRP plan. The bottom line is the math, and for some, the HSA’s Health Savings Accounts (HSA) may be a better route going forward. Legal Wiz.com

“#Individual Coverage ICHRA”
and the EBHRA “Excepted Benefit HRA ” (can’t pay premiums)

Advantages of the Individual Coverage HRA ICHRA  include, but are not limited to:

  • Funds can be used to reimburse the employee’s premiums for an individual health insurance policy.   Get a quote
  • Reimbursements made to employees do not count towards the employee’s taxable wages.
  • The employer can choose to roll-over unused amounts into the following year.
  • Coverage can be offered to different classes of employees (e.g.; full-time, part-time, seasonal, salaried, hourly)
  • An offer of the Individual Coverage HRA represents an “offer of coverage” under the employer mandate, however, contributions must meet affordability guidelines. (affordability Health Care.gov) The IRS will release further guidelines regarding this later.
  • ICHRA will allow businesses the alternative to offer employees a monthly allowance of tax-free money. It allows them to buy individual health coverage tailored to fit their unique needs, control costs, and address ACA compliance for applicable large employers.  ICHRA.com *

The  ICHRA  Individual Coverage HRA also comes with restrictions and regulations including but not limited to:

  • An offer of an Individual Coverage HRA cannot be made to any employee that is offered a traditional group health plan.
  • If an offer of coverage is made to a class of employees, there is a minimum class size that is required. Size is typically 10% of that specific class of employees. For example, if an employer has 200 employees, a minimum of 20 employees would have to be in a specified class.
  • Contributions can be in any amount that the employer chooses, but contributions must be consistent for all employees in a specified class.
  • The employer must provide notice of the Individual Coverage HRA to employees.
  • The employer must be able to substantiate that the employee is enrolled in an individual plan or Medicare (model notices are available).
  • The employer must notify employees on an annual basis that the individual health insurance is NOT subject to ERISA.
  • The final rule also created the Excepted Benefit HRA which, starting in January of 2020, will permit employers to finance additional medical care. Employees can use the HRA without having to be enrolled in the group’s traditional health plan.
    • The requirements associated with the “Excepted Benefit HRA” include, but are not limited to:
      • The annual contribution is capped at $1,800.
      • It must be offered in conjunction with a group health plan, but there is no requirement for the employee to enroll in that plan.
      • The “Excepted Benefit HRA” cannot be used to fund group health or Medicare premiums.
      • It can fund premiums for dental, vision, or short-term limited duration insurance.
  • Employers who want to offer the “Individual Coverage HRA”  can do so but employees will need to enroll in an individual plan during the open enrollment periodbenefitmall.com * TASO FAQ’s * Take Command Heatlh FAQ’s * Health Care.gov *    SHRM.org *FAQ’s

 

FAQ’s, Links & Resources

The 21st Century Cures Act

President Barack Obama on Dec. 13 signed into law the 21st Century Cures Act, which will let small businesses use health reimbursement arrangements (HRAs) to fund employees who purchase individual health plans on the open market.

Learn More===>SHRM.org

The Cures act incorporates key elements of the proposed Small Business Healthcare Relief Act, creates a new type of HRA—the qualified small employer health reimbursement arrangement (QSEHRA). The legislation specifies that:

  • The maximum reimbursement for health expenses that small employers can provide through employee QSEHRAs is $4,950 for single coverage and $10,000 for family coverage, to be adjusted annually for inflation.
  • Small employers that choose to provide QSEHRAs must offer them to all full-time employees except those who have not yet completed 90 days of service, are under 25 years of age, or who are covered by a collective bargaining agreement for accident and health benefits. Part-time and seasonal workers may also be excluded.
  • Generally, an employer must make the same QSEHRA contributions for all eligible employees. However, amounts may vary based on the price of an insurance policy in the relevant individual health insurance market, which in turn can be based on the age of the employee and eligible family members, or the number of family members covered. 
  • Learn More===SHRM.org

Consumer Links & Resources

Aetna FAQ’s & Explanation
IRS More Info on Health Care Arrangements to not have a group plan but pay for employee individual plans Make sure your plan is ACA compliant or face HUGE penalties Wikipedia Other Insurance Clause – Dual Coverage?

Can the 105 plan pay lower benefits depending on the amount the employee receives from other insurance, like Medicare?

Section 105 of the Internal Revenue Code

Revenue Ruling 71-588 and

IRS Letter Ruling 9409006.

Section 105- Amounts Received Under Accident and Health Plans (Also Section 106-Contributions by Employers to Accident and Health Plans) Rev. Rul. 2005-24

Administrators – Plan Documents

Eflex 3rd Party Administrators

Core Documents.com

TASC for HRA’s

Purchase Plan Documents – It is not necessary for tax purposes that the plan be in writing or that the employee’s rights to benefits under the plan be enforceable. For example, an employer’s custom or policy of continuing wages during disability, known to the employees generally, has been held to constitute a plan. Niekamp v. U.S. , 240 F. Supp. 195 (E.D. Mo. 1965); Pickle, TC Memo 1971-304

MERP’sMedical Expense Reimbursement Plans

IRS Section §105  Wikipedia  On the other hand, many Insurance Carriers do not allow  Wraps (see Ben E Lect)    Blue Cross requires a signed statement that you won’t do it).  Qualified claims must be described in the HRA plan document at inception, i.e., before reimbursing employees for those medical expenses.

The employee does not have to report income as long as the plan complies with §106,   105 (b) and  Rev Ruling 2-41 The funding for medical expenses can be pay as you go.

Aetna,

Kaiser

UHC and

Health Net offer HRA’s &   HSA’s (Health Savings Accounts).

Please email [email protected] or call us 310.519.1335 to discuss further.

Visit our page in the HSA Section on MERPS.

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