Q&A: New Guidance on Defined Contribution Health Arrangements
The following questions and answers were originally prepared by Crowell & Moring, LLP on behalf of the American Benefits Council, to highlight some of the more significant aspects of IRS Notice 2013-54 and Department of Labor Technical Release 2013-03 (the “New Guidance”) for employers and plan administrators. Our detailed analysis of the New Guidance follows below.
Q1: Can an employer sponsor a stand-alone HRA for its active employees?
A1: No. The New Guidance reiterates past guidance from the Agencies in providing that an employer cannot sponsor an HRA for its active employees, unless the HRA is “integrated” with an underlying major medical plan that does not consist solely of what are called HIPAA-excepted benefits. (HIPAA-excepted benefits are certain categories of benefits that are not subject to HIPAA’s portability requirements– for example, dental or vision benefits that are offered under a separate insurance policy or contract, or are not considered an “integral part of the plan” under law.) Thus, an HRA must be only available to employees who are enrolled in qualifying employer-sponsored major medical coverage- otherwise, it will violate PPACA’s market reforms.