In late 2017, the IRS delivered guidance on the Qualified Small Employer Health Reimbursement Arrangement (QSE-HRA). The QSE-HRA is a new HRA plan design allowable only since December 2016. In early 2017, the IRS suspended the written notice requirement for 2017 plan years until further guidance could be issued (which we covered here).
When the guidance arrived, it delivered much more than the awaited information on the notice requirement along with a statement anticipating further guidance in response to Executive Order 13813.
In the weeks since Notice 2017-67 was issued, we have worked through its content to determine the information most useful to our clients as well as to those employers considering installing a QSE-HRA for the first time. Since it is a somewhat larger volume of text, we present the guidance in three parts:
An eligible employer is one that:
Also:
An eligible employer may provide employees with information about the Health Insurance Marketplace (Marketplace) or Premium Tax Credit (PTC) but does not endorse a particular policy, form, or issuer of individual health insurance.
If an employer is considered eligible to provide a QSE-HRA on January 1 of the current plan year but becomes an applicable large employer (ALE) with 50 or more full-time employees during the plan year, the employer:
An eligible employee is any active employee of a company, with the following allowable exclusions:
Also:
A QSE-HRA may not be provided for retirees.
QSE-HRA benefits must be provided on the same terms to all eligible employees.
“Same Terms” allows a sole exception dependent on the employee’s choice of individual vs. family coverage, but implementation of this exception is not required.
Employers may choose to include employees that can be excluded, for example, offering coverage at 30 days of employment rather than 90 days, but the QSE-HRA must be provided on the same terms to these employees as it is to all other eligible employees.
Also:
Employers may not offer employees a choice in QSE-HRA coverage options; however, the employer may choose to set limited benefits within a QSE-HRA, such as 1) premium only coverage, 2) cost-sharing expenses that are medical expenses, or 3) certain other defined medical expenses as long as it is on a same terms basis to all employees.
An employer’s defined coverage (per above) may not cause the arrangement to be effectively unavailable to some employees due to facts and circumstances.
An eligible employee may not waive QSE-HRA coverage since it is provided rather than offered by the employer.
The 2018 statutory dollar limit for a QSE-HRA is $5,050 for an employee choosing individual coverage and $10,250 for an employee choosing family coverage.
For a short first plan year, the statutory dollar limit will be pro-rated according to the number of months in the short plan year.
When an employee becomes eligible to participate during a plan year, the statutory limit for that employee is similarly pro-rated for the first, shorter participation year.
Also:
QSE-HRAs with a roll-over provision cannot allow the total dollars available to an employee in a plan year to exceed statutory dollar limits for the new plan year.
An employer providing a QSE-HRA must provide written notice to participating employees no later than 90 days before the beginning of each year.
For plan years beginning in 2017 or 2018, the notice requirement is 90 days after written guidance is received from the IRS. That date is now officially February 19, 2018.
For an employee not eligible to participate at the start of the year, written notice must be given no later than the date the employee becomes eligible.
Written Notice must include:
Coverage, Reimbursement, and Marketplace Coordination
Failure to satisfy, HSA interaction, and Effective date
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