IRS Proposes Revisions to ACA Reporting for Health Reimbursement Arrangements

As addressed in our prior post, IRS Notice 2015-68, issued on September 17, 2015, describes and requests comments on a number of ACA reporting issues, including several that that the IRS and Treasury Department plan to address in amended or new proposed regulations. Among the points addressed is avoiding duplicate reporting for multiple sources of MEC provided to the same individual (“supplemental coverage”). The Notice describes the current rule for reporting supplemental coverage as “confusing” and outlines a more streamlined alternative. Examples in the Notice describe how it will apply to Health Reimbursement Arrangements (“HRAs”) that are offered together with group health coverage.  Note:  MEC reporting generally is not required for HRAs, but per recent informal comments by the IRS on a payroll industry conference call, applicable large employers (ALEs) may have to report on HRA coverage that constitutes MEC via Part III of IRS Form 1095-C, under some circumstances.

The proposed new anti-duplication rules, which will apply month-by-month and individual-by-individual, will provide that if an individual is covered by multiple MEC plans or programs provided by the same provider, reporting is required for only one of them. Under this proposed rule, if an individual is enrolled in a self-insured group health plan for a given month and also is takes part in an HRA sponsored by the same employer, the employer, again via Section III of Form 1095-C, is required to report only one type of coverage for that individual (which most likely would be the self-insured group health plan) for that month. If an employee is covered under both arrangements for some months of the year but is covered only under the HRA for other months (for instance, because he or she retires or otherwise drops coverage under the self-insured group health plan), the employer must report coverage under the HRA for those months when it was the only MEC provided.

Under the second proposed anti-duplication rule, reporting generally is not required for MEC for which an individual is eligible only if the individual is covered by other MEC for which MEC reporting is required, so long as the two types of coverage are sponsored by the same employer. This describes the typical “integrated” HRA setting, in which an employer offers an HRA only to employees and dependents who enroll in the employer’s group health plan.  In this setting, a self-insured employer can take advantage of the first anti-duplication rule, and need not report the HRA as MEC for months in which an employee is enrolled in both plans.  However, an employer that is an ALE and sponsors an insured plan may have a reporting duty.  An insured employer that is an ALE need not provide MEC reporting in relation to the HRA for those months in which the employees and dependents are enrolled in the insured plan. However, if an employee is enrolled in an employer’s HRA and in a spouse’s employer’s group health plan, the employee’s employer must provide MEC reporting for the HRA.  If the employee’s employer is an ALE the HRA reporting is done via Form 1095-C, Section III.  If the employee’s employer is not an ALE it is done by completing Forms 1095-B and 1094-B.  In other words, the duty to report MEC coverage provided to non-employees under an integrated HRA applies even to an employer that is not an “applicable large employer” and need not report offers of coverage on Forms 1095-C and 1094-C.