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The Wagner Law Group Description 

The Wagner Law Group, A Professional Corporation, is a nationally recognized ERISA & employee benefits, estate planning, employment, labor & human resources practice. 

 

Established in 1996, The Wagner Law Group has 23 attorneys engaged exclusively in employee benefits, estate planning and employment law. Seven of our attorneys are AV rated by Martindale-Hubbell as having very high to preeminent legal abilities and ethical standards. The firm is among the largest ERISA boutiques in the country. Our practice is national in scope, with clients in more than 40 states and several foreign countries.

 

 

Contact Info

The Wagner Law Group

 

  Integrity | Excellence

  

Massachusetts Office 

Tel: (617) 357-5200 

Fax: (617) 357-5250 

99 Summer Street 

13th Floor

Boston, MA 02110


Florida Office 

Tel: (561) 293-3590
Fax: (561) 293-3591
7108 Fairway Drive
Suite 125
Palm Beach Gardens, FL 33418

   

San Francisco Office

Tel: (415) 625-0002

Fax: (415) 358-8300

315 Montgomery Street

Suite 904

San Francisco, CA 94104

 

www.wagnerlawgroup.com

 

 

October 17, 2013 

 State and Federal Law Alert

 

IRS Provides Guidance on Application of PPACA to HRAs and Health FSAs 

 

The IRS has issued Notice 2013-54 on the application of PPACA to health reimbursement arrangements ("HRAs") and health flexible spending accounts ("health FSAs"). Most of the Notice focuses on how two of PPACA's market reform provisions - the prohibition on annual dollar limits for essential health benefits ("EHBs") and the requirement that certain preventive services be provided without cost-sharing - apply to HRAs and health FSAs.

 

HRAs and Individual Contracts. The IRS has previously stated that HRAs with annual dollar limits on EHBs are permitted only if they are integrated with group health plans that have no such limits and if the HRA is available only to employees who are covered under the primary group health plan. (See Alert of 2/7/2013.)

 

The Notice clarifies that an employer-sponsored HRA cannot be integrated with individual policies. Thus, employer-sponsored HRAs that are paired with coverage purchased on the individual market will violate PPACA's annual dollar limit prohibition and preventive services requirement.

 

Integration of HRAs with Group Health Plans. The Notice explains that HRAs can be integrated with a group health plan through one of two methods.

 

Under the first method, an HRA is integrated with a group health plan if: 

  • The employer offers a group health plan that provides minimum value, meaning the plan's share of the total cost of covered benefits must be at least 60%;
  • Employees enrolled in the HRA are also enrolled in any group health plan that provides minimum value, regardless of whether the employer sponsors the plan; and
  • The HRA is available only to employees who are enrolled in group coverage that provides minimum value. 

Under the second method, an HRA is integrated if: 

  • The employer offers a group health plan that does not consist solely of excepted benefits;
  • Employees enrolled in the HRA are also enrolled in a group health plan;
  • The HRA is available only to employees who are enrolled in a non-HRA group health plan, regardless of whether the employer sponsors the plan; and
  • The HRA only provides reimbursements of copayments, coinsurance, deductibles and premiums of the group health plan, and medical care that is not essential health benefits.

HRAs and Opt-out Provisions. HRAs must now give employees an option to opt out of the HRA. This opt-out must be offered at least once a year to allow certain employees to claim a premium tax credit through the Exchange.

 

Health FSAs and PPACA's Market Reforms. The IRS previously issued interim final regulations exempting health FSAs from the prohibition on annual dollar limits for EHBs. The Notice clarifies that this exemption applies only if the health FSA is offered through a Code Section 125 cafeteria plan.

 

The Notice explains that health FSAs remain subject to PPACA's preventive services requirements unless the health FSA is an excepted benefit. Health FSAs are excepted benefits if: (i) the employer also offers a group health plan coverage that is not limited to excepted benefits, and (ii) the maximum benefit payable to the participant is not more than two times the participant's salary reduction amount for the health FSA for that year (or, if greater, the participant's salary reduction amount for the year plus $500).

 

In other words, the typical employee-contribution-only health FSA is an excepted benefit if the employer also offers a group health plan.

 

The guidance provided in Notice 2013-54 applies for plan years beginning on or after January 1, 2014. Notice 2013-54 can be accessed at: http://www.irs.gov/pub/irs-drop/n-13-54.pdf

    

 

This Newsletter is protected by copyright. Material appearing herein may be reproduced with appropriate credit.

  

Pursuant to Internal Revenue Service Circular 230, we hereby inform you that any advice set forth herein with respect to US federal tax issues is not intended or written by The Wagner Law Group to be used and cannot be used, by you or any taxpayer, for the purpose of avoiding penalties that may be imposed on you or any other person under the Internal Revenue Code.

 

This Newsletter is provided for information purposes by The Wagner Law Group to clients and others who may be interested in the subject matter, and may not be relied upon as specific legal advice.  This material is not to be construed as legal advice or legal opinions on specific facts. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.