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H.R. 5447 Small Business Healthcare Relief Act Would Create Safe-Harbor for Non-Exchange Individual Health Insurance Premium HRA Plans

 H.R. 5447 Passes House of Representatives, heads to Senate


June 23, 2016 by Gene Ennis,

On June 21, 2016, the “Small Business Healthcare Relief Act” (H.R. 5447) passed in the House of Representatives by voice vote.

H.R. 5447 would create a safe-harbor for innovative employer payment arrangements. It specifically allows small businesses with fewer than 50 employees to give pre-tax dollars through a Health Reimbursement Arrangement (HRA), to help employees purchase a health plan in the individual market. It allows that HRA to be used to pay for qualified health expenses on a pre-tax basis. To qualify, an employee would need to have health insurance coverage, and reimbursement payments to any given employee would be capped at $5,130, indexed for inflation (if an HRA also provides for reimbursements for an employee’s family members, the cap is $10,260). Under this proposal, employees would be prohibited from receiving a double benefit from qualifying HRAs and Obamacare premium tax credits. H.R. 5447 also establishes a number of notice and reporting requirements. The bill mandates that employers provide eligible employees with a written notice containing the amount of the employee’s permitted benefit. Additionally, the bill requires that employers report contributions to a reimbursement arrangement on their employees’ W-2 forms.

As a result of the September 2013 guidance issued jointly by the Department of the TreasuryHealth and Human Services, and the Department of Labor, employers were prohibited from using HRAs to support their employees’ purchase of health insurance on the individual market. This is because the Administration determined such an arrangement did not satisfy the Affordable Care Act’s minimum benefit and annual dollar cap requirements for health insurance plans offered by employers. Under the guidance, employers who continued to offer HRAs would be subject to a $100 per day, per employee penalty totaling up to $36,500 per year. These penalties went into effect on July 1, 2015. H.R. 5447 responds to this agency action by allowing small businesses to use pre-tax HRAs to financially assist their employees with the purchase of health coverage and related costs.

According to Dr. Charles Boustany, a co-sponsor of the bill, “The Small Business Healthcare Relief Act is a common-sense, bipartisan solution ensuring our small businesses aren’t penalized for trying to do the right thing. HRAs are an affordable solution for both employees and employers to combat the escalating cost of health insurance.”

This is a great example of the continued bi-partisan support we are seeing in the House, and it is encouraging for us regarding the Cadillac Tax as we continue our efforts to repeal the bill in the remainder of the legislative year.


Core Documents, Inc. has been providing free consulting, affordable plan documents, and plan updates as needed for Section 125 Cafeteria Plans and Health Reimbursement Arrangements since 1997. See more information about these fringe benefit plans at Core Documents’ website: https://www.coredocuments.com, or call toll free 1-888-755-3373.

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