June 14, 2019
The Trump administration has issued a final rule to allow tax-preferred health reimbursement arrangements (HRAs) to be used under certain conditions to purchase coverage in the individual market, which could provide a potential defined contribution option for employer-provided health care benefits should Congress zero out the ACA’s employer mandate penalty.
The final rule primarily affects small employers that are not subject to the employer mandate penalty. For a large employer, the amount the employer contributes to the HRA would have to meet the ACA’s affordability standard to avoid the employer mandate penalty. The IRS will provide more information on this soon.
Other aspects of the proposal include:
Outlook: Although employers can start offering Individual Coverage HRAs and Excepted Benefit HRAs on January 1, 2020, the final rule is likely to be challenged in court and subject to congressional oversight hearings in the House.