How Does “Play or Pay” Affect HSA and HRA Contributions?

July 11, 2013

Many companies have turned to Health Savings Accounts (HSAs) and Health Reimbursement Arrangements (HRAs) to shift more responsibility for health care costs to employees. If your business is one of them, you may have been wondering how your contributions to these plans affect the “play or pay” provisions of the Patient Protection and Affordable Care Act.

In May of this year, the IRS released guidance clarifying, among other things, how an employer’s HSA and HRA contributions count toward its shared responsibility to provide affordable health care benefits of at least minimum value.

According to the guidance, an employer’s total HSA contributions for the current plan year count toward the minimum value calculation. For HRA contributions, amounts made newly available for the current plan year — that can be used for only premiums or for either premiums or cost-sharing reduction — will be treated as an employee’s earnings and can be considered available to him or her to increase the affordability of the employer’s health care coverage.