Congress Reinstates Health Reimbursement Arrangements

Filed in Capitol Hill by on December 7, 2016 8 Comments

moneyhealthIn a major victory for home building firms and other small businesses across the land, the Senate today passed the 21st Century Cures Act, a comprehensive health care package which includes a provision to allow employers to provide Health Reimbursement Arrangements (HRAs) to help their employees pay for health insurance.

The House approved the bill last week and President Obama is expected to sign the measure into law shortly.

“NAHB has been spearheading efforts to reinstate the use of HRAs since the IRS issued guidance prohibiting their use,” said NAHB Chairman Ed Brady. “This bipartisan legislation is an important step forward to allow small business owners to help their workers with rising health care costs and to ensure more Americans receive affordable health coverage. At the same time, it will protect employers against outrageous fines for providing this cost-sharing option to their workers.”

HRAs allow small businesses to offer pre-tax dollars to insured employees to help pay premiums and/or other out-of-pocket costs associated with medical care and services. Most small companies do not have human resource departments or benefits specialists. HRAs offer these businesses a simpler, easier way to help their employees to obtain health coverage.

The Internal Revenue Service issued guidance in 2013 stating that employers are no longer able to use HRAs because they don’t meet the requirements of the Affordable Care Act.

Not only did the IRS make HRAs illegal, the agency decreed that all employers can face fines of $100 per day per employee if they offer this benefit to their workers. That can add up to $36,500 per employee over the course of a year and up to $500,000 per company. This $100 per day penalty went into effect on July 1, 2015.

NAHB has led the charge working independently and with a coalition of other business organizations to remedy this injustice by calling on the IRS to revoke its ruling on the use of HRAs and pushing for a congressional solution.

At NAHB’s urging, a section was added to the 21st Century Cures Act that would reinstate the use of HRAs and rescind the punitive IRS penalties associated with them.

“NAHB commends Congress for bringing choice and affordability to the health care marketplace by allowing small employers to once again use HRAs,” said Brady.

For more information, contact Suzanne Beall at 800-368-5242 x8407.

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Comments (8)

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  1. Darius Grimes says:

    Good job! Now if we could just do something about the ACA preventing small businesses with family member employees eligible for group coverage again.

    • Rich Krzyminski says:

      Yes I agree, mine went from 1,400 to 2,500 for me and my wife. We have no dental, no vision, higher deductibles, less coverage etc…

  2. Maureen Cregan Connolly says:

    And please bring back the ability for Trade organizations to broker health insurance again

  3. Phil says:

    Good to know the HSA is deductable again, or soon to be anyway. I’ve been offering a taxable version since 2015

    • Kim says:

      This is for HRA’s (Health Reimbursement Account)- HSA’s (Health Savings Account) have always been pre-tax dollars up to the annual limit if the person is on a high deductible plan.

  4. Sarah says:

    Are HRA’s deductible though?

    • NAHB Now says:

      In general, an employer may deduct contributions made to an HRA and any funds reimbursed from an HRA are exempt from the employer’s payroll taxes and Social Security taxes. Please note, NAHB is providing this information for general guidance only. Before making any decision or taking any action on this information, you should consult a qualified professional adviser to whom you have provided all of the facts applicable to your particular situation. You may also wish to read the IRS publication on HRAs:https://www.irs.gov/publications/p969/ar02.html#en_US_2015_publink1000204194

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