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HSAs, HRAs and FSAs: Employee Benefits After the ACA and Latest DOL/IRS Guidance

Navigating New Compliance Requirements and Leveraging Defined Contribution Plans in the Current Environment

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TUESDAY, NOVEMBER 19, 2013

Presenting a live 90-minute webinar with interactive Q&A

Elizabeth Kappenman, Senior Counsel, Wells Fargo & Company, Minneapolis Stanley Baum, Of Counsel, Cary Kane, New York Kenneth A. Mason, Partner, Spencer Fane Britt & Browne, Overland Park, Kan.

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CARY KANE LLP

HSAs, HRAs and FSAs : Employee Benefits After theACA and Latest DOL/IRS Guidance

Stanley D. Baum

sbaum@carykane.com

November 11, 2013

www.carykane.com New York

CARY KANE LLP

• 1. What is an FSA?

 In general, a health care flexible spending account (for convenience, an “FSA”) is an account offered under a cafeteria plan, under Section 125 of the Internal Revenue Code (the “Code”).  This account provides a benefit designed to reimburse an employee for medical care expenses (as defined in Code Section 213(d)), other than premiums, incurred by the employee, or the employee’s spouse, dependents, and any children who, as of the end of the taxable year, have not attained age 27.  Typically, reimbursements from an FSA will be applied to pay medical expenses not covered by the employer’s general group health care plan, such as deductibles, co-payments and other cost sharing, and medical items not covered, such as cosmetic surgery, infertility treatment, long-term care and weight loss programs.

5

CARY KANE LLP  Technically, to be an FSA, Code Section 106(c)(2) requires that the arrangement must be a benefit program which provides an employee with coverage under which: (a) specified incurred expenses may be reimbursed (subject to reimbursement maximums and other reasonable conditions) and (b) the maximum amount of reimbursement which is reasonably available to the employee for the coverage is less than 500% of the value of the coverage. Thus, the maximum reimbursement which is reasonably available cannot exceed 5 times the employee’s salary reduction contributions plus employer

• contributions. The proposed cafeteria plan regulations generally use this

definition (see Prop. Treas. Reg. Sec. 1.125-5(a)).  The reimbursements are not taxable to the employee, under Code Section 105.  The account is funded by before-tax contributions made by the employee, under a salary reduction arrangement with the employer, through the cafeteria plan (i.e., the employee is not taxed on salary applied to make these contributions, under Code Section 125(a)).

6

CARY KANE LLP  Employers may provide additional contributions, in excess of the salary reduction amount, to the account (e.g.,, the employer may offer “flex credits” that may be applied toward various benefits, but may not be taken in cash). The additional contributions are also not taxable to the employee, under Code Section 106.  In general, amounts the employee contributed to the account for a plan year, but not applied to reimburse medical expenses incurred during the plan year, are forfeited at year end under the “use-it-or-lose it rule” (employers may allow a grace period of two months and 15 days after year end to incur expenses that may be reimbursed prior to any forfeiture).

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Cary Kane LLP

• 2. Which medicines and drugs are reimbursable by an FSA?

 An FSA may reimburse the cost of prescribed medicines and drugs, and the cost of insulin whether or not prescribed.  Under the Affordable Care Act (for convenience, the “ACA”), effective January 1, 2011 and other than insulin, an FSA may not reimburse the cost of

• ver-the-counter medicines, drugs and other items for which no prescription

has been provided.

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CARY KANE LLP

• 3. Are an employee’s salary reduction contributions to an FSA capped?

 Effective for plan years beginning after 2012, under Code Section 125(i), the ACA has limited to $2,500 the amount of the salary reduction contributions that an employee may make to the FSA each plan year.  The $2,500 amount will be indexed and increased for inflation for plan years beginning after 2013.  Additional employer contributions, and total amounts reimbursable by the FSA, are not limited by Code Section 125(i).

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CARY KANE LLP Under IRS Notice 2012-40, the following rules apply to the $2,500 cap:

• Cafeteria plans may adopt the required amendments to reflect the $2,500

limit at any time through the end of calendar year 2014.

• In the case of a plan providing a grace period for incurring expenses after

year end, unused salary reduction contributions to the FSA for plan years beginning in 2012 or later , which are “carried over” into the grace period for that plan year, will not count against the $2,500 limit for the subsequent plan year.

• The $2,500 limit applies on an employee-by-employee basis. Thus, $2,500

limit is the maximum salary reduction contribution each employee may make for a plan year, regardless of the number of other individuals (for example, a spouse, dependents, or adult children whose medical expenses are reimbursable under the FSA). As such, each of two spouses, with the same employer, may elect to make salary reduction contributions of up to $2,500 in each plan year.

10

CARY KANE LLP

• For purposes of applying the $2,500 limit, all employers aggregated under

Code Sections 414(b), (c) or (m) are treated as being a single employer. If an employee participates in multiple FSAs maintained by employers, who are so aggregated and treated as being a single employer, the employee’s total salary reduction contributions under all of the FSAs are limited to $2,500. However, an employee of two or more employers who are not so aggregated may elect salary reduction contributions of up to $2,500 under the FSA maintained by each of those employers.

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Cary Kane LLP

• 4. What is the status of the “use-it-or-lose it rule” after the ACA? Nothing in

the ACA had abolished or otherwise affected this rule. But under IRS Notice 2013-71 (issued October 31, 2013), a carryover (as opposed to forfeiture) of unused amounts in the FSA is permitted, under the following rules:  The employer, at its option, is permitted to amend its Section 125 cafeteria plan document, including the provisions governing the FSA, to provide for the carryover to the immediately following plan year of up to $500 of any amount remaining unused as of the end of a plan year. A lower carry over amount may be specified.  The amount carried over may be used to pay or reimburse medical expenses under the FSA incurred at any during the entire plan year to which it is carried over.

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CARY KANE LLP  The amount remaining unused as of the end of the plan year is the amount unused after medical expenses have been reimbursed at the end of the plan’s “run-out period” (i.e., the period immediately following the end of a plan year during which an employee can submit a claim for reimbursement of medical expenses incurred during that plan year).  The amount carried over does not count against the $2,500 salary reduction contribution limit for the plan year to which it is carried, but does count against the 5 times rule in the definition of FSA, and against the 2 times amount in the excepted benefits Safe Harbor discussed below.  An FSA using the carry over cannot have a grace period in a plan year to which unused amounts may be carried over.

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CARY KANE LLP  The amount carried over cannot be converted to cash or applied to acquire a benefit other than medical expense reimbursement.  For ease of administration, the FSA may treat reimbursements of all claims for expenses that are incurred in the current plan year as reimbursed first from unused amounts credited for the current plan year and, only after exhausting these current plan year amounts, as then reimbursed from unused amounts carried over from the preceding plan

• year. Any unused carried over amounts then reduce the amounts available

to pay prior plan year expenses during the run-out period.

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CARY KANE LLP  To utilize the new carryover option, the Section 125 cafeteria plan offering the FSA must be amended to set forth the carryover provision. The amendment must be adopted by the last day of the plan year from which amounts may be carried over, and may be effective retroactively to the first day of that plan year, provided that: (a) the plan operates in accordance with the guidance under this notice and (b) informs employees

• f the carryover provision. As a transitional rule, the plan may be

amended to adopt the carryover provision for a plan year that begins in 2013 at any time on or before the last day of the plan year that begins in 2014.  If a plan has provided for a grace period and is being amended to add a carryover provision, the plan must also be amended to eliminate the grace period provision by no later than the end of the plan year from which amounts may be carried over.

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CARY KANE LLP

• 5. To help allow employees to make choices pertaining to the purchase of health

insurance on an ACA Insurance Exchange, IRS Notice 2013-7 furthers guidance included in the proposed regulations for Code Section 4980H, by providing transitional rules about making elections pertaining to FSAs.  Generally, Section 125 cafeteria plan elections, including FSA salary reduction elections, must be made before the start of the plan year, and are irrevocable during the plan year, with limited exceptions, including certain changes in status specified in existing regulations (see Prop. Treas. Reg. Section 1.125-2, Treas. Reg. Section 1.125-4).  Under existing regulations, the availability of health plan coverage through an ACA Insurance Exchange (also referred to in other published guidance as a Marketplace) beginning with calendar year 2014 does not constitute such a change in status.

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CARY KANE LLP  Under the transitional rules, the employer may, at its election, amend its Section 125 cafeteria plan to allow employees to make either or both of the following changes in salary reduction elections, including those under the FSA and those pertaining to the pre-tax purchase of health care plan coverage: (a) an employee, who elected to salary reduce under a Section 125 cafeteria plan with a non-calendar plan year, is allowed to prospectively revoke or change this election once during the plan year starting in 2013; and (b) an employee who failed to make a salary reduction election under a Section 125 cafeteria plan with a non-calendar plan year, prior to the start of the plan year starting in 2013, is allowed to make a prospective salary reduction election on or after the first day of the 2013 plan year.

17

Cary Kane LLP  This transitional rule is available to all employers, despite its status under Code Section 4980H.  This transitional rule is available on or after December 28, 2012.

18

Cary Kane LLP

• 6. Does the ACA impose new requirements on group health plans?

 The ACA amended the Code, ERISA, and the Public Health Safety (“PHS”) Act to impose various new requirements on group health plans.  But these new requirements do not apply to a group health plan which provides only excepted benefits (Code Section 9831(b), ERISA Section 732(b), PHS Act Sections 2722(b) and 2763).  Further, these new requirements do not apply to a group health plan that has fewer than two participants who are current employees on the first day of the plan year.

19

CARY KANE LLP  The new requirements are, among others, that: (a) no annual or lifetime limits may be imposed on the dollar amount of any essential health benefits, (b) non-grandfathered group health care plans must cover certain preventive services without imposing any cost-sharing requirements, (c) non- grandfathered group health care plans must provide external review of denied claims and (d) a group health care plan cannot impose a waiting period for enrollment which exceeds 90 days.  The excepted benefits are, among others: accident-only coverage, disability income, certain limited-scope dental and vision benefits, and certain long- term care benefits (Code Section 9832(c), ERISA Section 733(c) and PHS Act Section 2791(c)).

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Cary Kane LLP

• 7. Are FSAs subject to the ACA’s new requirements for group health plans?

 An FSA is a “group health plan”, within the meaning of Code Section 9832(a), ERISA Section 733(a), and PHS Act Section 2791(a).  Under IRS Notice 2013-54 and Technical Release No. 2013-03 (for convenience, since they are identical, the notice and technical release are referred to as the “Notice” below) an FSA is considered to provide only excepted benefits for a plan year if: a) other group health plan coverage, which is offered by the employer maintaining the FSA, and which is not limited to excepted benefits, is made available for the plan year to employees by the employer; and

21

CARY KANE LLLP b) the FSA is structured so that the maximum reimbursement available to any participant cannot exceed two times the employee’s salary reduction contributions under the FSA for the year (or, if greater, cannot exceed $500 plus the amount of the employee’s salary reduction contributions for the year). Notes: (i) This rule is a Safe Harbor- reimbursements under the FSA need not be limited to expenses for excepted benefits for the Safe Harbor to apply. (ii) Its not clear, but based on wording on Treas. Reg. Sec. 54.9831-1(c)(3)(v), an FSA may not be treated as “excepted benefits only”, even if reimbursements are limited to expenses for excepted benefits.

22

CARY KANE LLP (iii) The group health plan coverage in condition (1) of the Safe Harbor has to be made available to employees; the employees need not elect it. (iv) The $500 amount in the Safe Harbor ties into the newly permitted $500 carryover.  If the FSA provides more than the excepted benefits, then: (a) Except as follows, all of the new ACA requirements apply to the FSA. (b) The Notice indicates that the FSA is not treated as being “integrated” with any other group health plan, with the result that the FSA will fail to meet the preventive services requirements.

23

CARY KANE LLP (c) However, under the Notice, the new annual dollar limit prohibition will not apply to an FSA, even if it provides more than excepted benefits. (d) Also, under the Notice, this FSA will be treated as providing “minimum essential coverage”, disqualifying participants from eligibility for premium tax credits for health insurance purchased

• n an ACA Insurance Exchange.

Querry: Despite the Notice, can it be argued that the FSA could be “integrated”, thus enabling it to pass the preventive services requirement? To be “integrated”, enrollment in a group health plan maintained by the employer must be a condition to participating in the FSA.

24

CARY KANE LLP  If the FSA is considered to provide only excepted benefits (or if it has less than two participants at the start of the plan year), then: (a) None of the new ACA requirements will apply to the FSA. (b) Also, under the Notice, this FSA will not be treated as providing “minimum essential coverage”, allowing participants to remain eligible for premium tax credits.

25

Cary Kane LLP

• 8. Can an FSA be offered outside of a cafeteria plan?

 No. Under the Notice, after September 13, 2013 an FSA that is not offered through a Code Section 125 cafeteria plan is-nothwithstanding the general rule- subject to the annual dollar limit prohibition under the ACA, and will be treated as failing to comply with that prohibition and thus will fail to meet ACA requirements.  The general rule applies only to FSAs offered under a Code Section 125 cafeteria plan since they are already subject to the $2,500 limit on salary reduction contributions.  An FSA offered outside of a cafeteria plan would be a health reimbursement arrangement (an “HRA”) or other arrangement which is funded principally through employer contributions, and which meets Code Section 106(c)(2).

26

CARY KANE LLP

• 9. When does the Notice Apply?

 The Notice applies in plan years beginning after 2013, but employers may apply the guidance provided for all prior periods.

27

HSAs, HRAs and FSAs: After the ACA and Latest DOL/IRS Guidance

Elizabeth Kappenman

Senior Counsel Wells Fargo Bank, N.A. Elizabeth.J.Kappenman@wellsfargo.com November 19, 2013

Overview

• General Requirements
• Eligibility
• Contributions
• Distributions
• Reporting Requirements
• Cadillac Tax
• ERISA

29

HSAs - Generally

• Described in section 223 of the Internal Revenue Code.
• A funded account, similar to an IRA.
• In order to contribute to an HSA, an individual must be covered

under a "high-deductible health plan" ("HDHP") and may not participate in any other non-HDHP, subject to certain exceptions.

• Bank or insurance company serves as HSA custodian/trustee..
• Employers may be involved with these accounts, or individual may
• pen one without employer’s involvement

30

Eligibility – Basic Rules

General Requirements

• Covered by an HDHP
• No other non-HDHP coverage
• Not enrolled in Medicare
• Cannot be claimed as a dependent on someone else’s tax return

Notice 2012-14 – Indian Health Service Facility

• Provides guidance on whether an individual eligible to receive medical

services at an Indian Health Service facility is an HSA “eligible individual.”

• An individual who is eligible to receive medical services at an IHS

facility, but who has not actually received such services during the previous three months, is an eligible individual. An individual generally is not an eligible individual if the individual has received medical services at an IHS facility at any time during the previous three months.

31

Eligibility – Impact of FSA/HRA Coverage

• An HSA account holder may generally not contribute to an HSA if

also covered by a Health FSA and/or HRA except where:

• FSA and/or HRA are limited-purpose arrangements that only

pay or reimburse vision and dental expenses, or preventive care benefits; or

• FSA and/or HRA only pay or reimburse medical expenses after

the deductible of the HDHP has been satisfied.

• Spousal FSA
• Makes account holder ineligible if account holder’s expenses

can be reimbursed.

• IRS would require spouse’s FSA to exclude individual from

coverage under the FSA in order for the individual to retain status as an HSA-eligible individual.

32

Eligibility – Impact of FSA Grace Period on HSA Eligibility

• Health FSAs may have up to a 2.5 month grace period at the end of a

plan year.

• Originally, individual in a full-purpose FSA was considered ineligible

for an HSA for the full grace period, even if the individual had a zero balance in the FSA as of the end of the plan year.

• Under TRHCA, if an individual’s balance in his or her full-purpose FSA

is zero at the end of the preceding year, the individual may nonetheless contribute to an HSA during the grace period (“zero balance rule”).

• Administrative difficulties in applying the zero balance rule.

Notice 2007-22

33

Eligibility – Impact of Notice 2013-71 (FSA Rollover) on HSA Eligibility

• Rollover of funds could impact HSA eligibility for the following year
• Assuming full-purpose FSA and that rolled over funds could be

used for the entire plan year, the individual is HSA-ineligible for the entire year (as opposed to 3 months for a grace period situation).

• Would it be ok to roll funds from a full purpose to a limited

purpose FSA?

• Could individual forfeit the rollover to preserve HSA eligibility?
• Will there be additional agency guidance?

34

Contributions – Method of Contributing to HSAs

• Contributions may be made by an individual on an after-tax basis,

with a corresponding deduction available.

• An employer may offer an HSA option as part of its cafeteria plan,

allowing an individual to make HSA contributions on a pre-tax basis.

• Employers may structure employer HSA contributions through a

cafeteria plan, or make contributions without using a cafeteria

• plan. Different testing rules apply depending on method chosen.

35

Contributions – ACA – Impact on Actuarial Value

• Actuarial Value is general measurement of health plan generosity

Bronze (60%), Silver (70%), Gold (80%), Platinum (90%).

• Intended to allow consumers to compare plans.
• Calculated by dividing: [the essential health benefit costs reimbursed by the

plan] by [the total essential health benefit costs covered by the plan]

• HHS Calculator:

http://cciio.cms.gov/resources/regulations/index.html#pm

36

Contributions – ACA – Impact on Actuarial Value

• Employer HSA contributions may be credited to actuarial value –

but there is an adjustment

• Employee and individual HSA deposits not credited to actuarial

value

• Employer HSA contributions could potentially boost a plan from
• ne metal level to the next metal level.

37

Contributions – ACA – Impact on Minimum Value

• If an employer does not offer health coverage that has a minimum

value of at least 60%, its employees who enroll in an exchange plan may be eligible to receive a federal premium subsidy or qualify for reduced cost-sharing.

• Impacts “shared responsibility” provisions of ACA.
• Employer HSA contributions may be taken into account in

determining MV, similar to with AV.

38

Distributions

• Must be used for Qualified Medical Expenses
• Insurance premiums are generally not eligible expenses, with a

few exceptions

• Individual monitors; no substantiation required by

trustee/custodian or employer

• Debit card serves as distribution tool

39

ACA Direct Impact on HSA Distributions

• The cost of over-the-counter drugs, other than insulin, are not be

eligible for reimbursement as a qualified medical expense under HSAs, HRAs, and health FSAs unless prescribed by a physician. (Effective 2011)

• Increases penalty from 10% to 20% for non-eligible medical

expense withdrawals. (Effective 2011)

40

Reporting Requirements

Custodian Obligations

• Form 5498-SA – Reports contribution to an HSA (issued in May)
• Form 1099-SA – Reports distributions from an HSA (issued in January)

Employer Obligations

• All employer contributions (including an employee's contributions through a

cafeteria plan) to an HSA are reported in box 12 of Form W-2 with code W.

• Employer contributions to an HSA that are not excludable from the income
• f the employee also must be reported in boxes 1, 3, and 5.
• ACA Impact: Health Care Reform requires that the aggregate cost of

employer-sponsored coverage be reported on an employee’s W-2 in box 12, Code DD. This does not apply to HSAs.

41

Cadillac Tax

• Cadillac Tax – Excise tax being imposed on some portion of high-

cost, employer sponsored health coverage beginning in 2018.

• HDHPs could help employers avoid the Cadillac tax because they

are generally more affordable. Could therefore be positive for HSAs.

• More guidance is expected in this area – waiting to learn how HSA

contributions impact tax.

42

Applicability of ERISA

Department of Labor Field Assistance Bulletins (FABs) 2004- 01 and 2006-02 FAB 2004-01 Establishment of the HSA must be voluntary and employer cannot:

• Limit the ability of eligible individuals to move their funds to

another HSA beyond restrictions imposed by the Code;

• Impose conditions on utilization of HSA funds beyond those

permitted under the Code;

• Make or influence the investment decisions with respect to

funds contributed to an HSA;

• Represent that the HSAs are an employee welfare benefit plan

established or maintained by the employer; or

• Receive any payment or compensation in connection with an

HSA.

43

www.spencerfane.com Kansas City  Omaha  Overland Park  St. Louis  Jefferson City  Denver

Employee Benefits After the ACA and Latest DOL/IRS Guidance Kenneth A. Mason

kmason@spencerfane.com

November 19, 2013

HSAs, HRAs and FSAs:

www.spencerfane.com Kansas City  Omaha  Overland Park  St. Louis  Jefferson City  Denver

Health Reimbursement Arrangements (“HRAs”)

 First described by IRS in 2002  Essential attributes:

 Employer-sponsored health plan  Bookkeeping accounts only  Only employer contributions allowed  Self-employed individuals ineligible  May reimburse expenses or premiums  Carryovers allowed from year to year

45

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More HRA Attributes

 Employer defines covered expenses

(so long as only “medical care”)

 Self-funded plan, so subject to

nondiscrimination rules of Code Section 105(h)

 Must comply with COBRA rules

 Without the special rules for health FSAs  But may allow spend-down, instead

46

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HRA Advantages

• ver HSAs

 No requirement for “high deductible

health plan”

 With minimum deductible, maximum

• ut-of-pocket expenses, etc.

 No contribution limits  No actual funding required  May forfeit account balance on

termination of employment

 May reimburse insurance premiums

47

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HRA Advantages over Health FSAs

 Balance may carry over to later years

 No “use-it-or-lose-it” requirement  May reimburse expenses incurred in an

earlier year (so long as employee was covered under HRA during that year)

 “Uniform coverage rule” does not apply  May reimburse insurance premiums

48

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Treatment of HRAs Under ACA

 Generally subject to same “market

reforms” as other health plans. E.g.:

 No lifetime or annual limits on coverage of

essential health benefits

 Mandatory first-dollar coverage of

“preventive health services” (unless grandfathered)

 Because an HRA cannot satisfy either of

these requirements, no free-standing HRAs will be allowed after 2013

49

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Retiree-Only HRAs

 Retiree-only HRAs are exempt from most

ACA requirements

 Technically, exemption applies to any plan

covering fewer than 2 active employees

 So may still offer HRA to retirees  But watch out for rehires!

 Note: Even retiree-only HRAs constitute

“minimum essential coverage,” which would disqualify retiree from receiving premium subsidy through an Exchange

50

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No Integration with Individual Insurance Policies

 HRA may not be integrated with an

individual insurance policy

 So may no longer allow active employees

to use HRAs to pay premiums for individual coverage (or to reimburse co- pays, etc. under that coverage)

 Even if individual policy satisfies ACA market

reforms, and

 Regardless of whether policy is purchased

through an Exchange

51

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Limited Integration with Group Coverage

 HRA may be integrated with an

employer group health plan, but only if certain conditions are satisfied

 Integrated HRA will be deemed to satisfy

ACA market reforms (if group plan satisfies those requirements)

 If employer also offers a “minimum value”

health plan, HRA may be used to pay a broader range of expenses

52

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General Integration Requirements

 Employer must sponsor group health plan

 Must provide more than excepted benefits

 Employee must be covered under such a

plan

 But plan may be sponsored by another

employer

 HRA must be available only to such

employees

 Employees must have at least annual

• pportunity to opt out of HRA

53

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Integration with Non-Minimum Value Group Coverage

 If employer’s plan does not provide

minimum value (or employee participates in plan sponsored by other employer that does not provide minimum value), integrated HRA may reimburse only

 Copayments, coinsurance, deductibles,

• r premiums under that plan, and

 Expenses for medical care other than

essential health benefits

54

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Integration with Minimum Value Group Coverage

 If employer sponsors minimum-value

plan (and employee participates in either that plan or a minimum-value plan sponsored by other employer), integrated HRA may reimburse

 Premiums, or  Any medical expenses

55

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Watch This Integration Trap

 If group coverage fails to cover a

category of essential health benefits, integrated HRA may not reimburse expenses in that category

 Doing so would violate ACA prohibition

• n annual or lifetime limits

 This prohibition is waived, however, if

group coverage provides minimum value

56

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Employer “Shared Responsibility” Treatment

 Current-year credits to integrated HRA

may be counted as follows under employer’s group health plan:

 Toward satisfaction of 9.5% affordability

requirement if HRA may be used for either premiums or medical expenses, or

 Toward satisfaction of 60% minimum-

value standard if HRA may be used only for medical expenses

57

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ACA Fees and Taxes

 Generally subject to PCORI fee

 Designed to support “comparative

effectiveness” research

 Currently $2 per covered life  Not subject to PCORI fee if employer

sponsors self-funded health plan having same plan year

 But if employer’s health plan is insured,

HRA is subject to PCORI fee

58

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ACA Fees and Taxes

 Transitional Reinsurance Program

 $63 per covered life in first year of TRP  Not applicable to active-employee HRA if

integrated with either self-funded or insured health plan

 Retiree HRA must pay TRP fee unless

secondary to Medicare

 Not subject to Health Insurance Provider

Fee

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www.spencerfane.com Kansas City  Omaha  Overland Park  St. Louis  Jefferson City  Denver

Effective Dates

 ACA market reforms are already

effective, although HRAs have enjoyed interim relief

 That relief expires on January 1, 2014

– to be replaced by the rules described above

 Transition relief provided for run-out

HRAs

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www.spencerfane.com Kansas City  Omaha  Overland Park  St. Louis  Jefferson City  Denver

Run-Out HRAs

 Amounts credited to HRA by end of

2013 may still be used in later years

 Will not violate market reforms  But will bar employee from receiving

premium subsidy through an Exchange

 Similar rules apply to amounts credited

to an integrated HRA prior to loss of integrated status (e.g., because employee drops group coverage)

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