Recent guidance from the Department of Treasury, Labor and Health and Human Services has clarified the legal status of certain account-based funding arrangements under the Affordable Care Act (ACA).
In particular, the Departments have stated the following commonly used plan designs will not comply with the ACA.
1. HRAs that are NOT integrated with other employer-sponsored coverage that complies with the ACA1. HRAs are not considered integrated if any of the following applies:
Transition relief is available for certain HRAs with unused amounts credited before January 1, 2014.
2. Cafeteria plans that pay or reimburse employees for coverage purchased on the individual market (other than through a SHOP.)
3. Health FSAs that are NOT excepted benefits. A Health FSA IS an excepted benefit if:
4. Pre-tax employer payment plans (other than cafeteria plans) that pay or reimburse employees for premiums for non-employer sponsored coverage. This does not include programs pursuant to which employees are taxed on employer payments or reimbursements.
1 These concerns do not apply to stand-alone retiree-only HRAs; however, retirees covered under such an arrangement would be deemed to have minimum essential coverage and would be ineligible for a premium tax credit.
