On December 7, 2016, the Senate passed the 21st Century Cures Act (“Cures Act”), which significantly expands small employers’ options for providing health coverage. The President has indicated that he will sign it into law. Once signed, the law will be effective for plan years beginning on or after January 1, 2017.
The HRA Relief Act allows small employers (defined as those who are not applicable large employers [“ALEs”]) to establish a qualified health reimbursement arrangement (“HRA”) that reimburses eligible employees and their family members for medical expenses, including individual health insurance premiums, up to a specified annual limit. In general, an employer is an ALE if it employed at least 50 full-time equivalent employees on average in the prior calendar year.
In addition, an eligible employer cannot offer a group health plan to any of its employees. A qualified HRA must be funded solely by employer contributions (i.e., no salary reduction contributions) and must be available to all eligible employees. To participate, eligible employees must demonstrate that they and any participating family members have enrolled in minimum essential coverage (“MEC”).
Amounts available under a qualified HRA cannot exceed $4,950 per year, as indexed ($10,000 if the HRA also covers family members). The employer’s annual contribution must be the same for all eligible employees; however, certain variations are permitted with respect to HRA funds that are available for reimbursement of individual market coverage.