Qualified Small Employer Health Reimbursement Arrangements
In December, JPS provided guidance to small employers on the ability to offer a qualified small employer health reimbursement arrangement (QSEHRA). To refresh, this a new arrangement that may be attractive to employers of fewer than 50 full-time equivalent employees, who do not offer a group health plan to any of its employees. This is not considered a group health plan and therefore escapes the requirements of the Affordable Care Act’s (ACA’s) market reforms that require portability, access and renewability.
Health insurance premiums, as well as out-of-pocket medical expenses paid by an employee are eligible for reimbursement under a QSEHRA.
Generally, an employer offering a QSEHRA must furnish written notice to its eligible employees of the QSEHRA’s benefits. Such a notice must include the following elements:
• A statement of the permitted benefits under that plan, including the maximum dollar amount of reimbursements that may be made. For 2017, that maximum is $4,940 for individuals and $10,000 for a family, although the plan could elect to reimburse at a lesser amount.
• A statement that the eligible employee should provide the information described above to any health insurance exchange to which the employee applies for advance payment of the premium tax credit.
• A statement that if the employee is not covered under minimum essential coverage for any month, the employee may be liable for an individual shared responsibility payment (individual mandate penalty) for that month, and reimbursements under the arrangement may be includible in gross income.
The original legislation establishing QSEHRAs required the above notice to be given no later than 90 days of the legislation’s enactment – that is, by March 13, 2017. However, new guidance issued by the IRS states that a QSEHRA beginning in 2017 is not required to furnish initial written notice until after further guidance has been provided by the IRS. That further guidance will specify a deadline for providing the initial written notice that is no earlier than 90 days following the issuance of that guidance.
We recognize this is a complex set of provisions, and urge you to contact your advisor at JPS if you have questions on establishing and administering a QSEHRA plan.
Complying with the Individual Mandate
Meanwhile, as Congress debates the repeal and replacement of Obamacare, confusion exists over individual taxpayer’s responsibility to report the existence of their health insurance coverage status. The IRS had put a system in place to reject 2016 tax returns of filers who did not disclose their coverage status on their returns. President Trump’s January 20, 2017 executive order directed the Department of Health and Human Services and “other agencies involved in administering the ACA” to use their authority to reduce the potential burden of compliance, and the IRS backed off their plan.
Some taxpayers have interpreted these recent developments to mean that they needn’t comply with Obamacare’s requirements. However, the requirement to have health insurance is still in effect. We will work with our clients to meet their responsibilities under the individual mandate.
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