health reimbursement arrangements (CRH) was one of the easiest ways for small businesses to offer employees a health benefit flexible tax advantages that control the costs of the company. Yet Affordable Care Act ( "Obamacare") Using the rules of limited HRA for plans from 1 January 2014.
There are, however, simpler options, tax benefits for companies that can not afford traditional insurance group health.
This article summarizes why the Affordable Care Act (ACA) CRH has changed and what to do if your company still offers.
Health Reimbursement Arrangement 101 - What?
If you search CRH in IRS tax code, you will not find the acronym. Publication 969 and Notice 02-45 are the most simple and easy to understand IRS publications related to CRH (yes, IRS and easy words were simply put in the same sentence) .
joking aside, these resources are fantastic. They confirm that CRH :.
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(no employee salary reductions) are financed by the employer
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reimburse employees and their dependents for qualified medical expenses.
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Provide reimbursement up to a maximum dollar limit and roll the unused amounts to the year to another.
Pretty flexible. To top it off, refunds are generally excludable from gross income of employees under internal Revenue Code Sections 106 and 105.
I think a tax professional requested CRH summarized in a concise sentence said the following :. an HRA is a type of repayment plan self-insured medical expenses
the Affordable Care Act New rules for group health plans
If you read this article, you are probably involved in a company (run, work, see) that gives employees the money for medical expenses such as insurance premiums and / or medical visits, copays, etc. Heck, your company would have even taken the time to write officials, documents of legal regime and called the plan an HRA to reap the tax benefits.
an employer that provides health care for employees and / or their dependents directly through insurance or indirectly through reimbursement, created a plan health group. And all group health plans must comply with the requirements of the applicable group health plan.
This is relevant because the ACA has created new requirements ( " market reforms ") for all plans group health which started on 1 January 2014. the IRS and the Department of Labour confirmed ad nauseam that these new requirements applicable to all types of group plans health, including CRH, ASF health, and the employer payment plans. specifically, group health plans are not allowed to impose limits on essential health benefits and should cover the services of healthcare primary prevention without cost sharing. There are others, but these two are the most relevant for the purposes of this article
employer consequences for not -compliance these requirements (old or new) can be significant. - Up to $ 36,500 per employee of the nondeductible excise taxes.
What makes HRAs Problematic the Affordable Care Act?
Therefore, CRH is a type of self repayment plan for uninsured medical expenses that small employers use all the time, some formal and some informal.
because employers still use CRH as an option benefits are at risk (one-person businesses, you agree) CRH is because, by definition, do fail to meet the requirements of the new health plan ACA group.
Since HRAs allow reimbursement of employees up to a maximum dollar limit for qualified medical expenses, it is very likely, if not certain, that the plan is to place a limit on one or more essential health benefits and would not allow a compliance test.
Furthermore, CRH that went undocumented or have been documented after 2014 and do not include preventive coverage of basic health care services are also likely to fail a test compliance.
An alternative option to CRH
If you used an HRA in the past or are looking for a tax-efficient alternative to group health the insurance, consider a health care reimbursement scheme (HRP).
HRP is a type of self-insurance medical reimbursement scheme (a group health plan) for individual health insurance and basic preventive health care reimbursement .
properly structured, a HRP complies with all applicable regulations, including the new requirements of the health plan of the ACA group.
Conclusion
the Affordable Care Act amended the HRA landscape for small businesses. Employers still use CRH are probably running an illegal plan should consider the transition to a repayment plan conforms to avoid heavy fines.
What questions do you have about the Affordable Care Act and CRH? Leave a question or comment below.
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