Monday, February 23, 2015

More Delays on HRAs

Technically, Health Reimbursement Arrangements (HRAs) aren't "insurance" at all, but a means to provide tax-advantaged financing of health care. Unlike Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs), HRAs are entirely employer-financed; they're like an employer-provided health care gift card.

Until the ObamaTax, HRAs were also quite flexible in how they were set up and for what they could be used. For example, pre-ACA, small employers could fund "standalone" HRAs that allowed employees to pay for privately purchased health insurance (among other things). This encouraged employees to buy the plan best suited to their needs, and employers could control costs because they weren't beholden to a group carrier's annual rate in creases.

Sadly, those days are gone.

One of the ways that these plans have been affected is increased taxation. Under the DC-enforced ObamaTax regulations, so-called "standalone" HRAs are subject to a pretty hefty excise tax. The good news (for certain values of "good") is that the IRS has graciously granted a (temporary) reprieve:

"The Treasury Department ... will delay enforcement of an Affordable Care Act prohibition relating to standalone health reimbursement arrangements until July 1"

Gee, how generous of them.

Oh, and that excise tax? $100 per employee per day (of non-compliance).


Naturally, I turned to our local Gurus of all things HRA (and FSA, and HSA), the folks at FlexBank, for their take:

"The deal is, the taxes are still coming, it’s just been delayed."

Pay me now, or pay me later. So sayeth DC.
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