There are two changes effective January 1st, 2017 for those schools, cities and counties who have an “Integrated” HRA Plan. Integrated HRAs are Health Reimbursement Arrangements tied to health insurance plans (as opposed to Retiree-Only HRA plans).
Change #1: IRS Notice 2015-29294 – Using an HRA for individual insurance premiums after employment ends
Prior to notice
Integrated HRAs cannot reimburse individual insurance premiums while the employee is actively employed. However, it was assumed that once the participant was no longer employed, the employee could submit individual insurance premiums for reimbursement during the “spend-down” period.
What will change?
The IRS now states that Integrated HRAs cannot reimburse individual insurance premiums even after the participant’s employment ends. Reimbursements during the “spend-down” period have the same reimbursement rules as those in active employment.
What if participants intended to use their Integrated HRA balance for health insurance premiums in retirement?
Active employees can continue to use the Integrated HRA. However, once retired or separated from service, their unused funds can roll into a Retiree-Only HRA plan, which would allow for reimbursements of individual insurance premiums during retirement or separation of service. This means that you will need a separate plan with separate plan documents.
If you currently have an Integrated HRA plan through National Insurance Services and MidAmerica Administrative & Retirement Solutions, Retiree-Only documents have been sent. If you have not already signed the documents, please return prior to January 1, 2017. You can contact Beth Lauck with any questions. Once the documents are returned, MidAmerica will amend the plan, handling all administrative concerns and automatically rolling retirees out of the integrated plan and into the retiree plan upon receipt of the employees’ termination dates.
Change #2 IRS Notice 2015-84 – Dependents seeking reimbursements from an HRA
Prior to notice
Prior to the notice, spouses and dependents were able to seek reimbursement from a participant’s HRA even if they were not covered under the participant’s employer’s group health plan. Initial interpretation of IRS Notice 2015-84 required that spouses and dependents must be enrolled in the employer’s health insurance plan in order to seek reimbursement from an HRA effective 1/1/17.
Due to an IRS clarification, dependents can seek reimbursements as long as the dependent has group coverage through another source. Note that they are ineligible for reimbursements if they have an individual health insurance policy.
If you currently have an Integrated HRA with National Insurance Services and MidAmerica Administrative and Retirement Solutions, the claim form has been updated to include an attestation that dependents have group coverage and are eligible for reimbursements. A message from MidAmerica will be included in the December 31st quarterly statements for Integrated HRA plan participants explaining this change. Nothing else needs to be done on the employer’s end at this time.
For questions, contact Beth Lauck, Retirement Income Service Manager.
National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.