The IRS issued Notice 2017-67 to provide guidance on Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs). The guidance goes into effect November 20, 2017, but is not the final IRS regulation regarding QSEHRAs. The IRS has requested comments no later than January 19, 2018. Alegeus and our industry partners, including the Employers Council on Flexible Compensation (ECFC), will provide comments to the IRS.
In December 2016, QSEHRAs were established as part of the 21st Century Cures Act, in response to provisions in the Affordable Care Act (ACA) that limited small employers ability to provide health reimbursement arrangements (HRAs). QSEHRAs allow small employers to reimburse employees for qualified medical expenses, including premiums for health insurance policies.
Two particular areas that the industry had requested further guidance on from the IRS were what defines an eligible employer and how a QSEHRA interacts with HSAs. Below is an outline of those points of interest included in the notice:
Employers that offer any group health plans are not eligible to offer a QSEHRA. The industry, through the ECFC, had recommended that the IRS allow employers that offered only a vision or dental benefit to offer a QSEHRA. The IRS did not take that position in this notice. Therefore, group coverage, including FSA, HRA, vision, dental, LPFSA would disqualify an employer and members of its controlled group from offering a QSEHRA. Since this is not the final regulation, there is still time to address this in the next round of comments to the IRS.
Interaction of QSEHRA and HSAs
Other topics covered in the notice
HRA Executive Order (No. 13813)
The notice also references the October 12th Executive Order that directed the Treasury (IRS), Department of Labor (DOL) and Department of Health and Human Services (HHS) to “consider revising guidance, to the extent permitted by law and supported by sound policy, to increase the usability of health reimbursement arrangements (HRAs), expand employers’ ability to offer HRAs to their employees, and to allow HRAs to be used in conjunction with non-group coverage.”
The notice states “The guidance provided in this notice addresses each of those objectives. The Treasury Department (Treasury) and the Internal Revenue Service (IRS) anticipate that the Departments will issue additional guidance in the future in response to Executive Order 13813.”
Learn more. Join Alegeus on November 16, 2017 for a webinar that examines how your business can benefit from the Executive Order and expanded HRA opportunity. You will hear from leading industry experts, Chris Condeluci, Principal at CC Law & Policy, and John Young, SVP of Consumerism & Strategy with Alegeus. Register now.
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