House passes small business HRA bill

The House passed the 21st Century Cures Bill (HR 34) on November 30. The bipartisan measure now heads to the Senate for consideration. Among its provisions, HR 34 would essentially exempt certain small employers who operate qualified Health Reimbursement Accounts (HRAs) from the penalties imposed by the Patient Protection Affordable Care Act (ACA). The bill would amend the Internal Revenue Code to allow qualified HRAs to operate without penalty. Qualification of these HRAs for small businesses would require adherence to certain limits, including:

• Funding solely by employer contributions, with no salary reduction contributions;
• Coverage obtained by a participating employee through an affordable ACA plan;
• Benefits capped, in general, at $4,950 per year ($10,000) for families;
• Proration of benefits for partial-year coverage;
• No group health plan offered to any employee; and
• Adherence to notification and reporting requirements.

The measure retroactively extends the initial penalty relief provided to small businesses under Notice 2015-17, IRB 2015-14, 845, to apply to any plan year beginning on or before December 31, 2016. The specific HRA requirements for qualified small employers specified within the bill would apply to years beginning after December 31, 2016.

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