Congress Approves HRA Bill

December 14, 2016

On Dec. 7, 2016, Congress passed the 21st Century Cures Act (H.R. 6) or “Cures Act,” which included a provision that would allow small employers to offer a Health Reimbursement Account (HRA) to employees independent of whether or not they offer an Affordable Care Act (ACA)-compliant health plan. An HRA allows employers to establish and fund a pre-tax account from which employees can pay for qualified medical expenses

Under current law, stand-alone HRA’s are prohibited, and any employer who offers an HRA absent an ACA health plan faces steep penalties. However, effective Jan. 1, 2017, the Cures Act will allow employers with less than 50 employees to offer a qualified HRA under the following requirements: it is offered to all eligible employees; it is funded only by the employer; it only reimburses employees for qualified medical expenses; it is limited to $4,950 for individuals and $10,000 for families; and cannot be used exclusively to benefit the business owners.

The ability of employers to offer HRAs was ended by regulators’ interpretation of the ACA in 2013, ending a very popular benefit for small-business owners. HRAs were—and now will again be—an affordable way for employers to help employees pay for medical costs and help smaller employers offer more competitive benefit packages—something that has been a significant challenge for many small firms.

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