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21st Century Cures Act Lets Small Employers Reimburse Premiums

On December 13, 2016, President Obama signed into law the 21st Century Cures Act, which allows small employers to maintain health reimbursement arrangements (HRAs) for the purpose of reimbursing employees for the cost of premiums for individual health insurance policies. 

As background, the IRS provided in Notice 2013-54 that employers who maintain HRAs that reimburse employees for the cost of premiums for individual health insurance policies violate the Patient Protection and Affordable Care Act (PPACA), subjecting such employers to potential excise taxes of $100 per day per affected employee. In Notice 2015-17, the IRS provided transition relief from these excise taxes to small employers not subject to the PPACA’s employer mandate. The transition relief under this notice ended on June 30, 2015. 

The Cures Act extends the penalty relief set forth in Notice 2015-17 through December 31, 2016, and permanently exempts from these excise taxes Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs), effective January 1, 2017. To qualify as a QSEHRA, an employer must satisfy the following requirements:

  • Employ on average less than 50 full-time employees and full-time equivalents

  • Not offer group health coverage to any employees

  • Offer HRA coverage to all employees, with certain permitted exclusions (e.g., part-time and seasonal employees)

  • Offer HRA coverage on the same terms to all eligible employees, with certain permitted variations based on the price of an individual policy (e.g., age and number of enrolled family members)

  • Offer HRA benefits that do not exceed $4,950 for individual coverage and $10,000 for family coverage (adjusted for inflation in future years)Distribute a specific annual notice regarding details of the employer’s HRA plan

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About this Author

Employment Attorney, Casey Fleming, Foley Law Firm

Casey K. Fleming is an attorney at Foley & Lardner LLP where she focuses her practice on employee benefits and executive compensation. Ms. Fleming’s employee benefits work includes advising private and public employers on the issues that affect retirement plans, health and welfare benefit plans, non-qualified deferred compensation plans, executive compensation and severance arrangements, and employment agreements.

Nick J. Welle, Foley, Employment Benefits Lawyer, qualified retirement plans attorney
Senior Counsel

Nick Welle is an associate and business lawyer with Foley & Lardner LLP. His practice is focused on health and welfare plans. He also assists clients with qualified retirement plans, including defined benefit and defined contribution plans.

Mr. Welle advises employers, insurers, and brokers concerning the federal laws governing health and welfare plans, including the Affordable Care Act (ACA), Employee Retirement Income Security Act (ERISA), Internal Revenue Code (Code), Health Information Portability and Accountability Act (HIPAA), Mental Health Parity and Addiction Equity Act (MHPAEA), Public Health Service Act (PHSA), Consolidated Omnibus Budget Reconciliation Act (COBRA), and the Family and Medical Leave Act (FMLA). He also assists clients with plan design and administration, including self-insured and fully-insured health and welfare plans and wellness programs. Mr. Welle has experience drafting and reviewing HIPAA policies and agreements, including privacy and security policies, business associate agreements, authorization forms, and notices of privacy practices.