IRS Grants Relief for many Integrated HRAs in Final Instructions for ACA Reporting Forms

The IRS has issued final instructions for Forms 1094 and 1095 (collectively, the "Forms"). Notably, the final instructions eliminate the requirement that employers report the coverage provided to employees under Health Reimbursement Arrangements ("HRA") that are integrated with the group health plans they sponsor. (Note: An integrated HRA conditions an employee's eligibility for enrollment upon enrollment in the employer's group health plan.)

Background. Applicable Large Employers are required to file Forms 1094 and 1095 to report their compliance with the Affordable Care Act's ("ACA's") employer shared responsibility provisions (i.e., employer mandate). In particular, Forms 1094 and 1095 provide certain information to the IRS and taxpayers regarding individuals who are covered by Minimum Essential Coverage ("MEC") and, therefore, not subject to the ACA's individual shared responsibility provisions (i.e., the individual mandate).  

For fully-insured group health plans, the insurance carrier is responsible for furnishing the Forms 1095-B to the IRS and employees, and the employer is responsible for furnishing Forms 1095-C to the IRS.  (Note: Employers that sponsor fully-insured group health plans need only complete Parts I and II of the Form 1095-C.)  For self-funded group health plans, the employer/sponsor is generally responsible for issuing and filing both Forms 1095-B and -C.

The applicable final regulations provide an exception to the reporting requirements for MEC that provides benefits as a supplement to a group health plan or arrangement. However, this exception only applies if the primary and supplemental coverages have the same plan sponsor.

IRS's draft instructions for the Forms explained that coverage isn't provided by the same plan sponsor if it isn't reported by the same entity. Thus, employers' integrated HRAs that were paired with fully-insured group health plans were not considered supplemental coverage. As a result, employers sponsoring such arrangements would be required to issue Forms 1095 to covered employees (and transmit copies to the IRS on Form 1094) enrolled in the HRA despite the insurance carrier's issuing Forms 1095 for the fully-insured coverage.

Final Instructions. Under the revised final instructions for the Forms, an employer that sponsors an integrated HRA paired with a group health plan that provides MEC need only report the major medical coverage. In other words, employers sponsoring such arrangements are no longer required to report the integrated HRA coverage. However, where an employee is covered by an HRA sponsored by one employer and a group health plan sponsored by another employer (e.g., spousal coverage), both employers must report the coverage that each provides using the Forms.

The final instructions for the Forms are available at: https://www.irs.gov/pub/irs-pdf/i109495c.pdf