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Regulatory Updates

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Great News for Small Employers

On November 13, 2016, President Obama signed the 21st Century Cures Act. Among a variety of healthcare provisions, this legislation establishes a new type of health reimbursement arrangement (HRA) called the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA).

With this new QSEHRA, small employers with less than 50 full-time employees will be able to reimburse employees for qualified health expenses and health insurance premiums.

This provision overturns Department of Labor and IRS guidance that currently prevents some employers from funding employer HRAs because these arrangements were found to violate the Affordable Care Act insurance market reforms. The agency guidance would still prohibit these arrangements for larger employers.

In order for an employer to qualify for this new HRA allowance, they must have less than 50 full-time employees, not offer a group health plan, and must provide the QSEHRA on the same terms to all eligible employees. The maximum reimbursement provided under the plan is $4,950 for single coverage and $10,000 for family coverage and is indexed in future years. However, these annual limits are prorated for participants not covered a full twelve months.

One other caveat, employees of the small employer must be covered under a health insurance plan with minimum essential coverage (MEC) in order to participate in the QSEHRA.

The provisions for QSEHRAs are effective for plan years beginning on or after January 1, 2017. 

WageWorks will be providing more details on this great news for small employers as details are publicized and regulations are propagated.

Download a copy of this Alert.