Client Alert: U.S. Department of Labor Issues Guidance Regarding Health Care Reform and Health Reimbursement Arrangements
The U.S. Departments of Labor, Health and Human Services, and the Treasury recently released a set of Frequently Asked Questions (“FAQs”) regarding the application of the Patient Protection and Affordable Care Act’s (“ACA”) annual and lifetime limits to HRAs.
The ACA prohibits lifetime monetary limits on essential health benefits (“EHB”). The ACA also prohibits annual monetary limits on EHB, although plans are able to avail themselves of transitional relief until the 2014 plan year.
The annual and lifetime limit restrictions apply to stand-alone HRAs but do not apply to integrated HRAs. Until the publication of the FAQs, there was little guidance as to what constituted an integrated HRA.
Although subject to change, the Departments’ current position, made clear in the FAQs, is that every HRA participant must be covered by the plan’s primary group health plan coverage for the HRA to be considered integrated with such coverage. In other words, if the plan allows a participant to opt-out of the primary coverage, the HRA is not integrated, and the annual and lifetime limit rules apply to the HRA.
The Departments’ position would apply to monies credited to accounts beginning January 1, 2014. The plan’s old rules would apply to monies credited to the accounts before that date.
The FAQs do not expressly address the treatment of HRA monies for retirees covered by a “non-retiree-only plan” who might no longer be eligible for the group health coverage. Based on the guidance, it appears that the government may want the HRA balance forfeited when the retiree becomes ineligible for the group health insurance coverage. To remedy this situation, plans may consider establishing a retiree-only HRA, which would not be subject to the ACA’s lifetime and annual limit rules.
We anticipate the Departments will issue additional guidance before the end of the year and we will keep you updated as developments occur. Once formal guidance is published, we will be in a better position to determine what steps, if any, are necessary to maintain integrated status.
This Client Alert is not intended to provide legal advice with respect to any particular situation and no decision should be based solely on its content. Please feel free to contact Timothy R. Bauman at (585) 232-5600 or firstname.lastname@example.org, with any questions or concerns regarding the issues raised in this Alert.