Question: Our company sponsors a Health Reimbursement Arrangement (HRA) that’s integrated with our fully insured major medical plan. Only employees who enroll in our medical plan can participate in the HRA, though expenses of an employee’s spouse or tax dependent are also covered.
We understand that the insurer is responsible for the information reporting required under Section 6055 of the Internal Revenue Code. But, as plan sponsor, is our company required to separately report the HRA coverage to the IRS and covered individuals?
Answer: In most cases, employers sponsoring HRAs don’t have to separately report HRA coverage that’s integrated with their major medical coverage. But, as we’ll explain, your company might have an HRA reporting obligation if your HRA reimburses expenses of employees’ spouses or tax dependents.
Sec. 6055 requires any coverage provider who provides “minimum essential coverage” to an individual during a calendar year to:
- Report certain health coverage information to the IRS, and
- Furnish a written statement to the covered individual.
The reporting — which is first required in 2016 for coverage provided in 2015 — is intended to help individuals prove they were covered by minimum essential coverage and therefore not subject to the Affordable Care Act’s (ACA’s) shared responsibility penalty for individuals. (Minimum essential coverage includes most employer-sponsored group health coverage, including integrated HRAs.)
The HRA coverage doesn’t have to be reported if the same coverage provider reports other minimum essential coverage for the individual. But that exception doesn’t apply to your company because your insured coverage is treated as provided by the insurer, not by the business itself.
Claiming another exception
Another reporting exception applies when HRA coverage is available only to individuals who are covered by other minimum essential coverage sponsored by the same employer. This exception applies to your employees’ HRA coverage because only employees who enroll in your company’s major medical plan can participate in the HRA, and both plans have the same plan sponsor.
The same exception applies to an employee’s spouse or tax dependents so long as coverage under your major medical plan is a condition of their HRA eligibility. If employees’ family members aren’t required to enroll in your major medical plan to obtain HRA coverage, it appears you must separately report their HRA coverage even if they, in fact, enroll in your major medical plan. (The IRS has yet to issue clarifying guidance on this point.)
Integrating other coverage
It’s not uncommon for an employer-sponsored HRA to reimburse the medical expenses of employees’ spouses and tax dependents — even if they haven’t enrolled in the employer’s major medical coverage. Under IRS guidance issued in December 2015, however, the nonexcepted HRA coverage of spouses and dependents must be integrated with another group health plan to satisfy the ACA.
Under certain conditions, a transitional rule allows continued HRA coverage for family members without integrated non-HRA coverage for plan years beginning before 2017. If your HRA doesn’t already require integration with other group health coverage, you’ll need to begin preparing for that requirement.
Reviewing the issues
This is a complex area, so be sure to review these issues and other HRA-related details with your benefits advisor and legal counsel. Also keep in mind that reporting requires efforts to obtain Social Security Numbers or Taxpayer Identification Numbers of covered individuals.