A Health Reimbursement Arrangement (HRA) is a tax-favored, employer-funded arrangement that pays for or reimburses the qualified medical expenses of an employee and/or his or her spouse and dependents.
The following is a list (not comprehensive) of common compliance issues regarding HRAs. PrimePay is in a position to help with all of them; learn more about that at the bottom of this post.
Compliance Issue 1 - ERISA
HRAs are employee welfare benefit plans subject to ERISA. While many of ERISA’s requirements can be addressed up front in the creation of the plan, Plan Sponsors also must comply with ERISA’s Claims Procedures and Appeals Rules as well as the Record Retention rules.
Compliance Issue 2 - SBC Distribution
Also as ERISA plans, HRAs are subject to the ACA’s Summary of Benefits and Coverage (SBC) requirement. SBCs describing the benefits provided by the HRA must be provided to all plan participants.
Compliance Issue 3 - PCORI Fees
All HRA Plan Sponsors must file IRS Form 720 and pay the new PCORI Tax each year on or before July 31st. These fees apply to policy and plan years ending after October 1, 2012 and before October 1, 2019 (i.e., for seven full policy or plan years). For calendar-year plans, the fees would apply for calendar plan years 2012 through 2018.
Compliance Issue 4 - HIPAA
Health Insurance Portability and Accountability (HIPAA) and the related Health Information Technology for Economic and Clinical Health (HITECH) rules impose numerous requirements to protect health information used in the administration of HRA plans. PrimePay incorporates the HIPAA / HITECH rules into our operations and communications with clients and plan participants.
Compliance Issue 5 - COBRA
For certain plans, a special exception may apply where the employer is not required to offer COBRA coverage or can limit the duration of COBRA coverage to the plan year in which the qualifying event occurs. HRAs will rarely qualify for the special exception. So, in general, employers with HRAs are required to offer COBRA coverage to qualified beneficiaries who would otherwise lose their HRA coverage due to a qualifying event, even if the HRA includes a spend-down feature.
Further, employers with HRAs generally must offer COBRA continuation coverage beyond the current plan year for the maximum coverage period applicable under COBRA. If an employee elects COBRA coverage for his or her HRA, the employee is required to have access to their unused balance as well as any additional accruals provided to similarly situated employees, less any year-to-date reimbursements. COBRA compliance for HRAs (and FSAs) can be complicated.
Although employers may be comfortable applying COBRA’s rules to their group health insurance plans, the same COBRA rules may be difficult to apply to HRAs
How to stay compliant with HRAs.
PrimePay can help! We’ll help with administration of consumer driven benefits for your company, no matter the size. Fill out the form below to learn more.