January 3, 2018
Recently, we have received a number of questions about an employer’s responsibility to comply with the Affordable Care Act’s (ACA) reporting requirements with respect to post-employment or retiree health reimbursement arrangement (HRAs) and other types of account-based health plans (collectively referred to herein as post-employment HRAs) used to provide health benefits to former employees. As a result, we are providing a refresher regarding these requirements so employers can prepare to comply with them to the extent they are applicable to an arrangement the employer offers to its employees and retirees.
Because post-employment HRAs technically provide minimum essential coverage (MEC), reporting under Section 6055 of the Internal Revenue Code generally applies. This reporting requirement is typically satisfied by completing and filing Forms 1094/1095-B. The “plan sponsor” of the coverage must file the applicable form with respect to the self-insured MEC coverage it provides to its former employees. [A post-employment HRA constitutes self-insured MEC.] In addition, notices must be provided to those former employees and other persons actually receiving the coverage.
Note: In most cases, the employer is the plan sponsor of the post-employment HRA. This is true even when the post-employment HRA has multiple employers participating in it. The instructions indicate the “plan sponsor” of a plan or arrangement established or maintained by more than one employer is each participating employer (for its own covered individuals).
Limited Exception – Duplicative Reporting Rules. If the former employee (and covered family members) are also covered under other MEC (e.g., group health coverage) sponsored by the same employer, the employer may not need to report the coverage received under the post-employment HRA. Instructions for Forms 1094-B and 1095-B (https://www.irs.gov/pub/irs-pdf/i109495b.pdf) describe two exceptions that apply when an individual is covered by multiple plans providing MEC:
There is one other situation in which there may be an exception for post-employment HRAs. Guidance from the IRS, available at https://www.irs.gov/Affordable-Care-Act/Questions-and-Answers-on-Information-Reporting-by-Health-Coverage-Providers-Section-6055, indicates (at Q/A-14) that no reporting is required for coverage that “supplements government-sponsored coverage such as Medicare.” The guidance does not indicate what it means by “supplements.” If the exception is available to any MEC that is secondary to an individual’s Medicare coverage, then the exception would apply with respect to participants of a post-retirement HRA who are enrolled in Medicare in many cases. [However, a post-employment HRA that covers a former employee who has Medicare coverage due to end-stage renal disease may provide primary coverage to Medicare depending on when the HRA participant became eligible for Medicare.] If, however, the term “supplements” means the coverage is intended to specifically coordinate with primary Medicare coverage (i.e., cover the portion of a medical expense that is not paid by Medicare), then the exception likely would not apply to a post-employment HRA. In light of this uncertainty regarding what coverage “supplements” Medicare, we recommend completing the reporting for post-employment HRA participants who are enrolled in Medicare until this exception is further clarified.
To Do Items:
Caution: According to the IRS, if a post-employment HRA reimburses the medical expenses incurred by the participant’s spouse and dependents, the spouse and dependents are considered to be covered by the plan. As a result, the Form 1095-B should including information regarding covered spouses and dependents (including their Social Security Numbers). See IRS Notice 2015-87, Q/A-4.
Please contact us if you have any questions.
 An exception applies if the arrangement is an excepted benefit under HIPAA. For example, post-employment HRAs that reimburse only expenses for dental care, vision care, and other excepted benefits are themselves an excepted benefit and are not considered MEC. Similarly, post-employment HRAs that qualify as HIPAA-excepted flexible spending arrangements also are not considered MEC.
 If the employer is required to file a Form 1095-C for the former employee covered under the post-employment HRA (e.g., due to the fact the former employee was employed during part of the year), the coverage under the post-employment HRA must be reported in Part III of the Form 1095-C.
As a leader in employee benefits law, Darcy Hitesman founded Hitesman & Wold in order to help public and private employers, insurers and third-party administrators nationwide stay informed and minimize the risk of non-compliance issues.
Hitesman & Wold provides a wealth of legal experience to their clients in the areas of ERISA, COBRA, HIPAA, Health Care Reform, welfare plans, cafeteria plans, HRAs, and VEBAs.
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