The IRS has issued a Notice of Proposed Rulemaking to clarify the application of the employer shared responsibility provisions and certain nondiscrimination rules under the Internal Revenue Code to health reimbursement arrangements (HRAs) and other account-based group health plans integrated with individual health insurance coverage or Medicare (individual coverage HRAs), and to provide certain safe harbors with respect to the application of those provisions to individual coverage HRAs.
In June, the U.S. departments of Health and Human Services, Labor and the Treasury issued a final regulation that will expand the use of HRAs. Under the rule, starting in January 2020, employers will be able to use what are referred to as individual coverage HRAs to provide their workers with tax-preferred funds to pay for the cost of health insurance coverage that workers purchase in the individual market, subject to certain conditions.
The Notice of Proposed Rulemaking addresses Section 4980H, related to employer shared responsibility provisions and affordability safe harbors; and Section 105(h) relating to income inclusion. The regulations are proposed to apply for periods beginning after December 31, 2019.
“The Treasury Department and the IRS recognize that employers may want to offer individual coverage HRAs beginning on January 1, 2020, and, therefore, may need applicable guidance with respect to Sections 4980H and/or 105(h) to design and implement programs involving individual coverage HRAs prior to the issuance of any final regulations and in advance of the plan year for which the individual coverage HRAs will be offered,” the agencies say.Employers and taxpayers may rely on the proposed regulations during any plan year of individual coverage HRAs beginning before the date that is six months following the publication of any final regulations.
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