Compliance Essentials for HRAs
The chart below outlines key tax and compliance considerations for different types of Health Reimbursement Arrangements (HRAs), including Qualified Small Employer HRAs (QSEHRAs), Individual Coverage HRAs (ICHRAs), and Excepted Benefit HRAs (EBHRAs). Employers and employees can use this chart to comprehend the regulatory framework for each HRA type.
| Plan Design / Compliance Issue | HRAs | QSEHRAs | ICHRAs | EBHRAs |
| Internal Revenue Code | §105, §106 | Code §9831(d) | Treas. Reg. §54.9802-4 | Treas. Reg. §54.9831-1 |
| Eligible Employer | Any employer, but must offer HRA with sponsor group health plan. | An employer must not be an ALE and not sponsor group health plan. | Any employer, but cannot offer group plan for those eligible for ICHRA. | Any employer must sponsor group health plan but cannot offer ICHRA to those eligible |
| Eligible Employees | Group eligible must pass eligibility test under Code §105(h) | Any employee of the “eligible employer,” and allows certain employees to be excluded | A group of employees defined by the employer participating in individual coverage, but cannot be eligible for group coverage or EBHRA | A group of all similarly situated individuals as defined by the employer, but cannot be offer ICHRA and group must pass nondiscrimination rules under Code §105(h). |
| When employees are eligible to participate | A waiting period cannot exceed 90 days. | When employee is no longer considered an excluded employee. | A waiting period cannot exceed 90 days. | A waiting period can exceed 90 days. |
| Salary Reduction Funding | Not permitted, but can be offered with Health FSA and POP | Not permitted | Not permitted, but can be offered with Health FSA and POP. | Not permitted, but can be offered with Health FSA and POP. |
| Eligible for HSA contributions | Yes, if reimburses only dental, vision and preventive care or post- deductible expenses | Likely yes, if reimburses only individual coverage premiums | Likely yes, if reimburses only individual coverage premiums and certain excepted benefits (e.g., dental or vision) | Yes, if reimburses only dental or vision expenses |
| Employees allowed to Opt-out | Yes | No | Yes | No |
| Permitted Amount of Contributions | Amount available is determined by employer | For 2024, self-only coverage is $6,150 & $12,450 for family coverage | Amount available is determined by employer | For 2024, $2,100. For 2025, $2150 |
| Carryover Of Unused Amounts | Permitted | Permitted | Permitted | Permitted |
| Medical Expenses Eligible For Reimbursement | Otherwise unreimbursed Code §213(d) medical expenses incurred while coverage in effect, including premiums for group eligible health insurance and long-term care insurance | Reimburse individual major medical health insurance premiums, as well as other Code §213(d) expenses incurred during the QSEHRA coverage period, is permitted. | Reimburse any Code §213(d) medical care expenses or to limit reimbursements to particular expenses (e.g., premiums), but not group health coverage. | Reimburse any Code §213(d) medical expenses but not premiums for individual health coverage, Medicare, or non-COBRA group coverage (premiums for coverage consisting solely of excepted benefits can be reimbursed). |
| Cash-Outs Of Unused Amounts (If No Medical Expenses) | Not permitted | Not permitted | Not permitted | Not permitted |
| 12-Month Period Of Coverage & Prohibition Of Mid-Year Changes | Not Applicable | Not Applicable | Not Applicable | Not Applicable |
| Health FSA Uniform Coverage Requirement | Not Applicable — i.e., coverage level may be prorated by plan design | Not Applicable | Not Applicable | Not Applicable |
| Expense Substantiation | Required | Required | Required | Required |
| Claims Adjudication | Required | Required | Required | Required |
| Tax Credit | HRA is considered with group health plan coverage to determine minimum value and affordability | Not applicable | Yes, under Code §4980H(a); possibly, under Code §4980H(b) (coverage must be affordable) | Not Applicable |
| Code §105(h) Nondiscrimination Requirement | Applies | Not applicable, if meets the eligibility rules | Applies, but the maximum reimbursement amount can vary between classes as provided under the ICHRA rules. ICHRAs must not be nondiscriminatory in the operation of the plan. These rules do not apply to ICHRAs that reimburse only insurance premiums (and not other medical expenses). | Applies |
| Funding Requirement | Not required—employers can decide to fund (i.e. set aside funds) as potential liability increases, but any such funding can invoke ERISA's trust requirement if amounts are segregated from general assets | Same | Same | Same |
| ERISA Requirements | Applies | Applies | Applies, but the individual coverage funded by an ICHRA is not subject to ERISA if certain requirements are met. | Applies |
| COBRA | Applies – Employer has 20 or more employees | Does not apply | Applies – Employer has 20 or more employees | Applies – Employer has 20 or more employees |
| Disclosures and notices | SPD & SBC | SPD & Special Notice | SPD & Special Notice | SPD |
| HIPAA: Portability And Health Status Nondiscrimination | Applies—Health FSA exception generally not available | Applies—Health FSA exception generally not available | Applies—Health FSA exception generally not available | Does not apply |
| HIPAA: Privacy | Applies | Applies | Applies | Applies |
| Medicare Secondary Payer Rules | Applies | Applies | Does not apply if certain conditions are met | Applies |