QSE-HRA Guidance: Failure to Satisfy, HSA Interaction, and Effective Date (Part 3 of 3)

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:

1. Eligibility, Terms, Limits and Notice Requirement
2. Coverage, Reimbursement, and Marketplace Coordination
3. Failure to Satisfy, HSA Interaction, and Effective Date (below)

Part III: Failure to Satisfy, HSA Interaction, and Effective Date

L. Failure to Satisfy the Requirements to be a QSE-HRA

A QSE-HRA will fail to satisfy when it:

• Is not provided by an eligible employer (number of employees, no group health plan, etc.).
• Is not provided on the same terms to all active, eligible employees;
• Reimburses medical expenses without requiring MEC; or,
• Provides a benefit higher than statutory limits.

M. Interaction with HSA Requirements

A QSE-HRA may cause an employee to be ineligible to participate in a Health Savings Account (HSA) if the QSE-HRA is set up so that it may reimburse any medical expense including cost sharing.

An employee will not lose HSA eligibility if the QSE-HRA is set up so that it reimburses premiums only for health insurance policies.

An employee will not lose HSA eligibility if the QSE-HRA is set up so that it reimburses only permitted insurance or disregarded coverage in addition to reimbursing premiums for health insurance policies.

N. Effective Date

Except where definitively stated elsewhere in this Notice, the effective date of this guidance is for plan years beginning on or after November 20, 2017. QSE-HRAs established before the effective date may rely on these rules.

In order to have established a QSEHRA before the effective date, the employer must have either:

• Taken action to adopt the QSE-HRA before the effective date,
• Provided a QSE-HRA to eligible employees before the effective date, or
• Furnished written notice to employees before the effective date.