Seeing the Big Picture – How Proposed Health Reimbursement Arrangements Might Harmonize with Existing Law

On October 29, 2018, proposed regulations were published in the Federal Register that would permit employers to offer two new types of health reimbursement arrangements (“HRAs”) that align with the requirements of the Affordable Care Act (the “ACA”). The proposed HRAs are designed to expand the availability of account-based group health plans. A summary of the proposed regulations – and the HRAs that they would permit if finalized – can be found in our November 7, 2018, blog, “Zombie Benefits – Are Health Reimbursement Arrangements Back from the Dead?”

As an addendum to the proposed regulations, the IRS published Notice 2018-88, which considers the interaction of the new HRAs with the employer shared responsibility mandate set out in Code Section 4980H and the non-discrimination rules contained in Code Section 105(h).

It is important to note that the Notice does not create any definitive guidance. Instead, the Notice offers a wide-ranging discussion of how the proposed HRAs might harmonize with the existing statutory and regulatory framework. For example, the Notice provides that an applicable large employer might satisfy the requirements of Code Section 4980H by offering employees the opportunity to participate in a proposed individual coverage HRA.

As this area continues to develop, employers may wish to review their current health benefit offerings. In particular, employers may consider whether implementing a proposed HRA would be beneficial with respect to compliance with Code Section 4980H.