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HRA Changes Coming in 2020: What You Need to Know
Heather Bowers • Sep 20, 2019
Looking for a way to offer a benefit to your employee while providing some tax-free savings?
Are you an employer looking for a way to offer a benefit to your employee while providing some tax-free savings?
Starting in 2020, employers will have three different HRA’s (Health Reimbursement Arrangement) that only employers can contribute to. We've put together a very high-level overview of these three different options:
QSEHRAs or Qualified Small Employer HRA-
These were first introduced for plan years beginning January 1, 2017 for qualified small employers that do not maintain a group health plan and that are not subject to the employer shared responsibility rules. (large employer mandate) QSEHRAs can reimburse employees individual health insurance premiums and out of pocket medical expenses that fall under Internal Revenue Code Section 213(d), on a tax-free basis, assuming they have active Minimum Essential Coverage during the month of the claim. In 2019, the employer contribution amount is limited to $5,150 per single employee or $10,450 for an employee with a family. Any unused funds can roll over from year to year, but an employee’s total in their account each year will take into account both rollover funds as well as employer contributions, and it may not exceed the statutory dollar limit that is in effect for that year. If an employee is not covered for the entire year, the maximum contribution must be prorated based on the number of months they were covered.
ICHRAs or Individual Coverage HRA-
Beginning on January 1, 2020, employers of all sizes can offer an ICHRA to their employees to reimburse employees premiums on a tax-free basis that are actively covered under a qualified individual health insurance plan or Medicare plan. They can also reimburse for all or a designated list of qualified medical expenses that fall under IRC Section 213(d). There are no employer contribution limits per year on an ICHRA. Employers can segment employees into 11 defined classes and provide a different contribution to each class but must provide the same contribution to all employees within the same class. An employer cannot offer a choice between a group insurance plan or an ICHRA to the same class of employees. Any unused funds in an ICHRA can roll over from year to year.
EBHRAs or Excepted Benefit HRAs-
Beginning on January 1, 2020, employers of all sizes can offer an EBHRA to their employees. In order to have an EBHRA, an employer is required to offer a group health plan to their employees, but employees can participate in the EBHRA whether they are covered under the employer’s group health plan or not. In 2020, the employer contribution is limited to $1,800. The funds in an EBHRA can be used to reimburse excepted benefits, such as dental or vision insurance, IRC Section 213(d) expenses not covered under the traditional group health plan, premiums and/or cost sharing for short-term limited-duration policies (some exceptions apply), COBRA premiums and/or cost sharing. Any funds remaining in the account can roll over to the next year.
Ready to learn more? Get in touch with a Lone Star Benefits benefits specialist at insurance@LSBinc.com!