Follow Chad Linkedin
Email Chad Email
Financial
Dec 19, 2016

Health Reimbursement Accounts: Back From The Dead

Sponsored Content provided by Chad Wouters - Partner, Earney & Company, LLP

Small businesses are now allowed to use Health Reimbursement Accounts (HRAs) without incurring penalties under the Patient Protection and Affordable Care Act (ACA) after the U.S. Senate passed the 21st Century Cures Act (CCA) on Wednesday, Dec. 7. The President signed the CCA into law on Dec. 13, and the new rules will apply to years beginning after Dec. 31, 2016.

In 2010, President Barack Obama enacted the ACA, which among several healthcare reforms, set in place rules for health plans, including HRAs. These plans were popularly used by employers to help control healthcare costs. The ACA restricted how employers were able to use HRAs. The IRS and the Department of Labor took the stance that HRAs did not comply with the market reforms of ACA, since HRAs provide a cap on how much they can reimburse employees. Starting July 1, 2015, employers using HRAs that failed to comply with the market reforms related to group health plans under ACA were subject to an excise tax of $100 a day per applicable employee.

The CCA overrules the IRS position, which concluded that HRA plans are group health plans that fail to comply with the market reforms. To be eligible to offer a qualified small business HRA, an employer must not be an applicable large employer (as defined by the ACA) and must not offer a group health plan to any of its employees.

The CCA defined “group health plan” as not including “any qualified small employer health reimbursement arrangement.” Under the act, a qualified small employer HRA must be provided on the same terms to all eligible employees and funded solely by an eligible employer, and there can be no salary reduction contributions under the arrangement. The HRA must provide for the payment of an eligible employee’s expenses for medical care incurred by the eligible employee or the eligible employee’s family members. The amount of payments and reimbursements under the plan for any year cannot exceed $4,950.

Small business owners should be rejoicing, as this is a significant win for them. For small businesses with fewer than 50 full-time employees, employers may offer standalone HRAs to their staff. Small business employers may also help cover health insurance premiums and out-of-pocket expenses for employees.

Although the law goes into effect for plan years beginning after Dec. 31, 2016, it’s important to note that the CCA does provide transition relief through that date so employers with non-compliant plans will not be penalized.

Chad Wouters, CPA joined Earney & Company in December 2006 and became the tax partner in November 2013.  With an emphasis on strategy and planning, Chad works with his clients all year to ensure the most efficient tax strategies are put into place.  Earney & Company, L.L.P.  is a CPA firm that handles tax compliance, consulting and planning as well as audit and other assurance services.  For more information please visit www.earneynet.com or call (910) 256-9995.  Chad can also be reached at [email protected].
 

Ecolarge
Ico insights

INSIGHTS

SPONSORS' CONTENT
Untitleddesign14 3325110041

How Does the Property Tax Valuation Appeal Process Work?

Larry Shaheen - The McIntosh Law Firm
Chris coudriet

New Hanover County’s Fellows Program Aims to Help Those Who Help Others

Chris Coudriet - New Hanover County Government
Headshot 6272430314

Write Your Own Succession Script

Amy Sullivan - Lumina Business Solutions, LLC

Trending News

Endowment Grants $1.6M To New Hanover County Amid County Budget Cut Talks

Cece Nunn - Jun 12, 2025

New Hanover County Officials Considering Job Cuts

Cece Nunn - Jun 12, 2025

New Hanover County Adopts 30.6-cent Tax Rate, Eliminates Nearly 100 Jobs

Cece Nunn - Jun 13, 2025

Leland Continues Work On Plan To Attract Jobs

Staff Reports - Jun 13, 2025

Offers Due This Week For City-owned Downtown Land Next To Skyline Center

Emma Dill - Jun 11, 2025

In The Current Issue

Island School Offers Unique Option

Located on Bald Head Island three miles off the coast of Southport, the Bald Head Island Academy, founded in 2022, is a private, K-8 school...


Small Business Spotlight: Company Sinks Teeth Into Diving

The company’s primary focus has shifted from salvage, recovery and inspection to recovery and sales of fossils....


Startup Founder Brings Others Together

Fleming’s day job is growing his social media marketing company Socialry, which he started five years ago. He’s also a local chapter organiz...

Book On Business

The 2024 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2024 Power Breakfast: The Next Season