Category: Health

IRS Announces COLA Adjusted Retirement Plan Limitations for 2026

The Internal Revenue Service released Notice 2025-67 announcing cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2026.

Highlights Affecting Plan Sponsors of Qualified Plans for 2026

  • The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $23,500 to $24,500.
  • The catch-up contribution limit for individuals aged 50 or over is increased from $7,500 to $8,000.
  • The new special catch-up contribution limit for individuals who attain age 60, 61, 62, or 63 in 2025 is $11,250.
  • The Roth catch-up wage threshold for 2024, which is used to determine whether an individual’s catch-up contributions for 2025 must be designated Roth contributions, is increased from $145,000 to $150,000.
  • The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $350,000 to $360,000.
  • The limitation on annual additions to defined contribution plans under Section 415(c)(1)(A) is increased from $70,000 to $72,000.
  • The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $280,000 to $290,000.
  • The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains at $160,000.
  • The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan is increased from $230,000 to $235,000.
  • The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $16,500 to $17,000.
  • The limit on annual contributions to an IRA increased from $7,000 to $7,500. The additional catch-up contribution limit for individuals aged 50 and over increased from $1,000 to $1,100.

The IRS previously updated Health Savings Account limits for 2026. The following chart summarizes various significant benefit Plan limits for 2024 through 2026:

Type of Limitation202620252024
415 Defined Benefit Plans$290,000$280,000$275,000
415 Defined Contribution Plans$72,000$70,000$69,000
Defined Contribution Elective Deferrals$24,500$23,500$23,000
Defined Contribution Catch-Up Deferrals$8,000 ($11,250 for age 60-63)$7,500
($11,250 for age 60-63)		$7,500
SIMPLE Employee Deferrals$17,000$16,500$16,000
SIMPLE Catch-Up Deferrals$3,850 ($5,250 for age 60-63)$3,850
($5,250 for age 60-63)		$3,500
Annual Compensation Limit$360,000$350,000$345,000
SEP Minimum Compensation$800$750$750
SEP Annual Compensation Limit$360,000$350,000$345,000
Highly Compensated$160,000$160,000$155,000
Key Employee (Officer)$235,000$230,000$220,000
Income Subject To Social Security Tax  (FICA)$184,500$176,100$168,600
Social Security (FICA) Tax For ER & EE (each pays)6.20%6.20%6.20%
Social Security (Med. HI) Tax For ERs & EEs (each pays)1.45%1.45%1.45%
SECA (FICA Portion) for Self-Employed12.40%12.40%12.40%
SECA (Med. HI Portion) For Self-Employed2.90%2.90%2.90%
IRA Contribution$7,500$7,000$7,000
IRA Catch-Up Contribution$1,100$1,000$1,000
HSA Max. Contributions Single/Family Coverage$4,400/$8,750$4,300/ $8,550$4,150/ $8,300
HSA Catchup Contributions (age 55)$1,000$1,000$1,000
HSA Min. Annual Deductible Single/Family$1,700/$3,400$1,650/
$3,300		$1,500/ $3,200
HSA Max. Out Of Pocket Single/Family$8,500/$17,000$8,300/
$16,600		$8,050/ $15,000

IRS Announces 2026 HSA Contribution Limits, HDHP Minimum Deductibles and HDHP Maximum Out-of-Pocket Amounts

The IRS has announced 2026 HSA and HDHP limits as follows:

Annual HSA contribution limitation. For calendar year 2026, the annual limitation on deductions for HSA contributions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $4,400 (up from $4,300 in 2025), and the annual limitation on deductions for HSA contributions under § 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $8,750 (up from $8,550 in 2025).

High deductible health plans. For calendar year 2026, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,700 for self-only coverage or $3,400 for family coverage (up from $1,650 and $3,300 in 2025), and with respect to which the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $8,500 for self-only coverage or $17,000 for family coverage (up from $8,300 and $16,600 in 2025).

Rev. Proc 2025-19

IRS Announces COLA Adjusted Retirement Plan Limitations for 2024

The Internal Revenue Service released Notice 2023-75 announcing cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2024.

Highlights Affecting Plan Sponsors of Qualified Plans for 2024

  • The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $22,500 to $23,000.
  • The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $150,000 to $155,000.
  • The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $265,000 to $275,000.
  • The limitation for defined contribution plans under Section 415(c)(1)(A) is increased from $66,000 to $69,000.
  • The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $330,000 to $345,000.
  • The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan is increased from $215,000 to $220,000.
  • The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a five year distribution period is increased from $1,330,000 to $1,380,000, while the dollar amount used to determine the lengthening of the five year distribution period is increased from $265,000 to $275,000.
  • The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $15,500 to $16,000.
  • The limit on annual contributions to an IRA increased from $6,500 to $7,000. The additional catch-up contribution limit for individuals aged 50 and over is now subject to an annual cost-of-living adjustment, but remains $1,000 for 2024.

The IRS previously updated Health Savings Account limits for 2023. See our post here.

The following chart summarizes various significant benefit Plan limits for 2022 through 2024:

Type of Limitation202420232022
415 Defined Benefit Plans$275,000$265,000$245,000
415 Defined Contribution Plans$69,000$66,000$61,000
Defined Contribution Elective Deferrals$23,000$22,500$20,500
Defined Contribution Catch-Up Deferrals$7,500$7,500$6,500
SIMPLE Employee Deferrals$16,000$15,500$14,000
SIMPLE Catch-Up Deferrals$3,500$3,500$3,000
Annual Compensation Limit$345,000$330,000$305,000
SEP Minimum Compensation$750$650$650
SEP Annual Compensation Limit$345,000$330,000$305,000
Highly Compensated$155,000$150,000$135,000
Key Employee (Officer)$220,000$215,000$200,000
Income Subject To Social Security Tax  (FICA)$168,600$160,200$147,000
Social Security (FICA) Tax For ER & EE (each pays)6.20%6.20%6.20%
Social Security (Med. HI) Tax For ERs & EEs (each pays)1.45%1.45%1.45%
SECA (FICA Portion) for Self-Employed12.40%12.40%12.40%
SECA (Med. HI Portion) For Self-Employed2.90%2.90%2.90%
IRA Contribution$7,000$6,500$6,000
IRA Catch-Up Contribution$1,000$1,000$1,000
HSA Max. Contributions Single/Family Coverage$4,150/ $8,300$3,850/ $7,750$3,650/ $7,300
HSA Catchup Contributions$1,000$1,000$1,000
HSA Min. Annual Deductible Single/Family$1,600/
$3,200		$1,500/ $3,000$1,400/ $2,800
HSA Max. Out Of Pocket Single/Family$8,050/
$14,100		$7,500/ $15,000$7,050/ $14,100

IRS Announces 2024 HSA Contribution Limits, HDHP Minimum Deductibles and HDHP Maximum Out-of-Pocket Amounts

The IRS has announced 2024 HSA and HDHP limits as follows:

Annual HSA contribution limitation. For calendar year 2024, the annual limitation on deductions for HSA contributions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $4,150 (up from $3,850 in 2023), and the annual limitation on deductions for HSA contributions under § 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $8,300 (up from $7,750 in 2023).

High deductible health plans. For calendar year 2024, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,600 for self-only coverage or $3,200 for family coverage (up from $1,500 and $3,000 in 2023), and with respect to which the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $8,050 for self-only coverage or $16,100 for family coverage (up from $7,500 and $15,000 in 2023).

Rev. Proc 2023-23

IRS Announces 2022 HSA Contribution Limits, HDHP Minimum Deductibles and HDHP Maximum Out-of-Pocket Amounts

The IRS has announced 2022 HSA and HDHP limits as follows:

Annual HSA contribution limitation. For calendar year 2022, the annual limitation on deductions for HSA contributions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,650 (up from $3,600 in 2021), and the annual limitation on deductions for HSA contributions under § 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $7,300 (up from $7,200 in 2021).

High deductible health plans. For calendar year 2022, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,400 for self-only coverage or $2,800 for family coverage (unchanged from 2021), and with respect to which the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $7,050 for self-only coverage or $14,100 for family coverage (up from $7,000 and $14,000 in 2021).

Rev. Proc 2021-25

Webinar: The Must-Do’s and Common Mistakes of Employee Benefit Planning

Lisa Dursey joins Stephanie Rising of The Rising Effect in a 15-minute webinar discussing the must-do’s and common mistakes of administering employee benefit plans. This webinar provides a concise primer on how to structure and correctly administer your plans.

Stephanie starts the webinar by explaining the importance of your new-hire process, and then dives more deeply into traditional and lifestyle benefits that attract and retain talented employees. Lisa then outlines the common mistakes that are made in administering those benefits, and how to correct them.

Contact ERISA Benefits Law to discuss your benefit plan administration or for help resolving any plan errors. Please note that in addition to general benefits advice, ERISA Benefits Law attorneys are well versed in designing sick leave policies for COVID-19.

IRS Announces 2021 HSA Contribution Limits, HDHP Minimum Deductibles and HDHP Maximum Out-of-Pocket Amounts

The IRS has announced 2021 HSA and HDHP limits as follows:

Annual HSA contribution limitation. For calendar year 2021, the annual limitation on deductions for HSA contributions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,600 (up from $3,550 in 2020), and the annual limitation on deductions for HSA contributions under § 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $7,200 (up from $7,100 in 2020).

High deductible health plans. For calendar year 2021, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,400 for self-only coverage or $2,800 for family coverage (unchanged from 2020), and with respect to which the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $7,000 for self-only coverage or $14,000 for family coverage (up from $6,900 and $13,800 in 2020).

Rev. Proc 2020-32

Corinavirus Impact on Arizona Paid Sick Time; Vacation Pay; and WARN Act Compliance

This post addresses the paid sick time, vacation pay, and WARN Act issues that employers should keep in mind as the Coronavirus causes escalating business disruptions, including both voluntary and government-ordered business closures.

We stand ready to assist employers with WARN Act notice, Arizona paid sick time, vacation/PTO and severance compliance issues raised by the business disruptions Arizona businesses are experiencing due to the Coronavirus. In addition, we will continue to update our clients as legislation affecting employee benefits is enacted in response to the Coronavirus outbreak. Together we will weather this storm, like we did in 2001 and in 2009.

Arizona Paid Sick Time

Arizona’s paid sick time law permits employees to use paid sick time for the following circumstances that may apply to the coronavirus outbreak:

  • Closure of the employee’s place of business by order of a public official due to a public health emergency 

Therefore, if the local, state or federal government orders the closure of an Arizona business, you will need to permit employees to receive paid sick time under Arizona law for the time of the closure, up to the amount of paid sick time they have available.

  • An employee’s need to care for a child whose school or place of care has been closed by order of a public official due to a public health emergency. 

Therefore, most Arizona businesses already need to provide paid sick time leave to parents who need to stay home to care for children whose school or daycare center has been closed by order of the state.

  • Care for oneself or a family member when it has been determined by the health authorities having jurisdiction or by a health care provider that the employee’s or family member’s presence in the community may jeopardize the health of others because of his or her exposure to a communicable disease, whether or not the employee or family member has actually contracted the communicable disease. 

This provision could arguably be construed to cover employees who are staying home and self-quarantining in the current circumstances. Therefore, if an Arizona business voluntarily closes (without being ordered by the state, local or federal authorities to close), it should evaluate whether to permit employees to use paid sick time under Arizona law for the time of the closure, up to the amount of paid sick time the employee has available.

Arizona Employers can Require Employees to Use their Paid Sick Time in Certain Circumstances

While Arizona law does not explicitly provide that an employer can designate leave time as earned paid sick time when an employee has not requested to use earned paid sick time, the Arizona Industrial Commission FAQs explain that the Industrial Commission will not pursue enforcement when an employer designates an employee’s time off from work as earned paid sick time, provided that the employer has a good faith belief that the absence meets the requirements of earned paid sick time usage.  

Therefore, we recommend that if a local, state or federal authority orders your Arizona business to close, you notify all of your employees that you will treat the closure time as paid sick time under Arizona law to the extent employees have paid sick time available.  
Further, if you voluntarily close, without being ordered to, you should give serious consideration to treating the closure time as paid sick time under Arizona law to the extent employees have paid sick time available, and further letting your employees know that if they do not want to take the time off as paid sick time they should let you know (within a short time period, and definitely before your next payroll deadline) that they do not want to use the time as paid sick time.

Paid Vacation or Paid Time Off

Most employers will also allow their employees to use paid time off or vacation to offset earnings losses the employees would otherwise incur during a business shutdown. However, that may not be required – i.e. it may be possible to not permit employees to take the time off as paid leave under the employer’s policy. This is entirely dependent on the provisions of your policy. If you have any questions about this, give us a call.

The WARN Act

The Worker Adjustment and Retraining Notification Act (WARN) protects workers, their families, and communities by requiring employers with 100 or more employees (generally not counting those who have worked less than six months in the last 12 months and those who work an average of less than 20 hours a week) to provide 60 calendar days advance written notice of a plant closing and mass layoff affecting 50 or more employees at a single site of employment. 

WARN requires employers who are planning a plant closing or a mass layoff to give affected employees at least 60 days’ notice of such an employment action. Damages and civil penalties can be assessed against employers who violate the Act.

Fortunately, WARN makes certain exceptions to the requirement of giving employees prior notice when the business closure or layoff occurs due to unforeseeable business circumstances, faltering companies, and natural disasters.  specifically, a government-ordered closure of an employment site that occurs without prior notice may be an unforeseeable business circumstance. Notice to employees and to the Arizona State rapid Response Coordinator is still required.

Pending Legislation Will Add Complexity

Legislation currently pending in Congress may provide emergency paid leave benefits for people dealing with the coronavirus outbreak (paid by the Social Security Administration), amendments to FMLA, and a new federal paid sick leave law. This legislation is in flux. When it becomes law, we will update our clients as to how to deal with it.

Departments of Labor, HHS and Treasury Clarify Application of Drug Manufacturer Coupons to Annual Cost Sharing Limitations

The recent final HHS Notice of Benefit and Payment Parameters for 2020 (2020 NBPP Final Rule), addresses how direct support offered by drug manufacturers to enrollees for specific prescription brand drugs (drug manufacturers’ coupons) count toward the annual limitation on cost sharing.

Under that guidance, for plan years beginning on or after January 1, 2020, plans and issuers are explicitly permitted to exclude the value of drug manufacturers’ coupons from counting toward the annual limitation on cost sharing when a medically appropriate generic equivalent is available.

Background

Public Health Service (PHS) Act section 2707(b), as added by the Affordable Care Act, provides that all nongrandfathered group health plans, including non-grandfathered self-insured and insured small and large group market health plans, shall ensure that any annual cost sharing imposed under the plan does not exceed certain limitations (in 2020: $8,150 for self-only coverage and $16,300 for other than self-only coverage).

The 2020 NBPP Final Rule amended 45 CFR Section 156.130 by adding paragraph (h) to read as follows (emphasis added):

§ 156.130 Cost-sharing requirements.

* * * * *

(h) Use of drug manufacturer coupons. For plan years beginning on or after January 1, 2020:

(1) Notwithstanding any other provision of this section, and to the extent consistent with state law, amounts paid toward cost sharing using any form of direct support offered by drug manufacturers to enrollees to reduce or eliminate immediate out-of-pocket costs for specific prescription brand drugs that have an available and medically appropriate generic equivalent are not required to be counted toward the annual limitation on cost sharing (as defined in paragraph (a) of this section).

https://www.federalregister.gov/documents/2019/04/25/2019-08017/patient-protection-and-affordable-care-act-hhs-notice-of-benefit-and-payment-parameters-for-2020

Previously, the federal regulations were silent as to this issue. The problem arises due to a combination of (1) competition between drug manufacturers in the specialty drug categories, and (2) cost control steps recently taken by plan sponsor (and insurers). As CVS explains in describing its “True Accumulation” program:

As competition in specialty therapy classes grows, manufacturers have been increasingly using tools common in the traditional brand drug market — such as copay coupons — to build consumer loyalty, increase sales, and bypass payor cost-control strategies. Copay cards — those not based on financial need — help encourage the use of more expensive therapies by negating the impact of higher cost-sharing tiers on member out-of-pocket (OOP) cost. Payors seeking more aggressive control of their specialty spend can combine the tiered specialty approach with a True Accumulation feature, which ensures only true member cost share (non-third party dollars) is applied toward deductibles or OOP caps. The accumulator automatically adjusts member OOP costs when specialty copay cards are billed by a CVS Specialty pharmacy. The amount subsidized by the copay card does not count toward the member’s deductible or annual OOP maximum. True Accumulation may also be used independent of the specialty tier design and will cover all specialty drugs that offer a non-needs-based copay card.

https://payorsolutions.cvshealth.com/insights/a-foundational-approach-to-specialty-cost-management

The 2020 NBPP Final Rule was clearly designed to encourage programs suhc as CVS’s True Accumulation, but it could potentially be read to create a conflict with the rules for high deductible health plans (HDHPs) that are intended to allow eligible individuals to establish a health savings account (HSA). Specifically, Q&A-9 of IRS Notice 2004-50 states that the provision of drug discounts will not disqualify an individual from being an eligible individual if the individual is responsible for paying the costs of any drugs (taking into account the discount) until the deductible of the HDHP is satisfied.

Thus, Q&A-9 of Notice 2004-50, requires an HDHP to disregard drug discounts and other manufacturers’ and providers’ discounts in determining if the minimum deductible for an HDHP has been satisfied and only allows amounts actually paid by the individual to be taken into account for that purpose.

So the HDHP rules and the 2020 NBPP Final Rule could put the sponsor of an HDHP in the position of complying with either the requirement under the 2020 NBPP Final Rule for limits on cost sharing in the case of a drug manufacturer coupon for a brand name drug with no available or medically appropriate generic equivalent or the IRS rules for minimum deductibles for HDHPs, but potentially being unable to comply with both rules simultaneously.

Recognizing this tension, the Departments issued som FAQs on August 26, 2019 indicating that:

  • Their initial interpretation (in the 2020 NBPP Final Rule) of how drug manufacturers’ coupons apply with respect to the annual limitation on cost sharing is ambiguous
  • They intend undertake rulemaking to clarify this in the forthcoming HHS Notice of Benefit and Payment Parameters for 2021.
  • Until the 2021 NBPP is issued and effective, the Departments will not initiate an enforcement action if an issuer of group or individual health insurance coverage or a group health plan excludes the value of drug manufacturers’ coupons from the annual limitation on cost sharing, including in circumstances in which there is no medically appropriate generic equivalent available.

See https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQs-Part-40.pdf

Final Rules Expand Availability of Health Reimbursement Arrangements and Other Account-Based Group Health Plans

On June 13, 2019 the U.S. Departments of Health and Human Services, Labor, and the Treasury (the Departments) issued final rules that the Departments stated “will provide hundreds of thousands of employers, including small businesses, a better way to provide health insurance coverage, and millions of American workers more options for health insurance coverage.”

Summary of the Final Rules

The final rules expand opportunities for employers to establish Health Reimbursement Arrangements (HRAs) and other account-based group health plans under various provisions of the Public Health Service Act (PHS Act), the Employee Retirement Income Security Act (ERISA), and the Internal Revenue Code (Code). Specifically, the final rules:

  • Allow employers to integrate HRAs and other account-based group health plans with individual health insurance coverage or Medicare, if certain conditions are satisfied (an individual coverage HRA).
  • Set forth conditions under which certain HRAs and other account-based group health plans will be recognized as limited excepted benefits.
  • Provide rules regarding premium tax credit (PTC) eligibility for individuals offered an individual coverage HRA.
  • Clarify rules to provide assurance that the individual health insurance coverage for which premiums are reimbursed by an individual coverage HRA or a qualified small employer health reimbursement arrangement (QSEHRA) does not become part of an ERISA plan, provided certain safe harbor conditions are satisfied
  • Provide a special enrollment period (SEP) in the individual market for individuals who newly gain access to an individual coverage HRA or who are newly provided a QSEHRA.

The stated goal of the final rules s is to expand the flexibility and use of HRAs and other account-based group health plans to provide more Americans with additional options to obtain quality, affordable healthcare. The final rules generally apply for plan years beginning on or after January 1, 2020.

Implications for Employers

Employers can contribute as little or as much as they want to an Individual Coverage HRA. However, Employers that offer an Individual Coverage HRA, must offer it on the same terms to all individuals within a class of employees, except that the amounts offered may be increased for older workers and for workers with more dependents.

An employer cannot offer an Individual Coverage HRA to any employee to whom you offer a traditional group health plan. However, you can decide to offer an individual coverage HRA to certain classes of employees and a traditional group health plan (or no coverage) to other classes of employees.

Employee Classes

Employers may make distinctions, using classes based on the following status:

  • Full-time employees,
  • Part-time employees,
  • Employees working in the same geographic location (generally, the same insurance rating area, state, or multi-state region),
  • Seasonal employees,
  • Employees in a unit of employees covered by a particular collective bargaining agreement,
  • Employees who have not satisfied a waiting period,
  • Non-resident aliens with no U.S.-based income,
  • Salaried workers,
  • Non-salaried workers (such as hourly workers),
  • Temporary employees of staffing firms, or
  • Any group of employees formed by combining two or more of these classes.

To prevent adverse selection in the individual market, a minimum class size rule applies if an employer offers a traditional group health plan to some employees and an Individual Coverage HRA to other employees based on:

  • full-time versus part-time status;
  • salaried versus non-salaried status; or
  • geographic location, if the location is smaller than a state.

Generally, the minimum class size rule also applies if you combine any of these classes with other classes. The minimum class size is:

  • Ten employees, for an employer with fewer than 100 employees,
  • Ten percent of the total number of employees, for an employer with 100 to 200 employees, and
  • Twenty employees, for an employer with more than 200 employees.

Also, through a new hire rule, employers can offer new employees an Individual Coverage HRA, while grandfathering existing employees in a traditional group health plan.

ACA Employer Mandate

An offer of an Individual Coverage HRA counts as an offer of coverage under the employer mandate. In general, whether an applicable large employer that offers an Individual Coverage HRA to its full-time employees (and their dependents) owes a payment under the employer mandate will depend on whether the HRA is affordable. This is determined under the premium tax credit rule being issued as part of the HRA rule and is based, in part, on the amount the employer makes available under the HRA.

The Internal Revenue Service is expected to provide more information on how the employer mandate applies to Individual Coverage HRAs soon.

Administrative Requirements

Individual Coverage HRAs must provide a notice to eligible participants regarding the Individual Coverage HRA and its interaction with the premium tax credit. The HRA must also have reasonable procedures to substantiate that participating employees and their families are enrolled in individual health insurance or Medicare, while covered by the HRA.

Employees must also be permitted to opt out of an Individual Coverage HRA at least annually so they may claim the premium tax credit if they are otherwise eligible and if the HRA is considered unaffordable.

Employers generally will not have any responsibility with respect to the individual health insurance itself that is purchased by the employee, because it will not be considered part of your employer-sponsored plan, provided:

  • An employee’s purchase of any individual health insurance is completely voluntary.
  • The employer does not select or endorse any particular insurance carrier or insurance coverage.
  • The employer does not receive any cash, gifts, or other consideration in connection with an employee’s selection or renewal of any individual health insurance.
  • Each employee is notified annually that the individual health insurance is not subject to ERISA.

More….

The Final Rules can be found here

DOL FAQs can be found here