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House approves bill easing HRA restrictions

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Tax Hot Topics | House approves bill easing HRA restrictionsThe House passed legislation (H.R. 5447) last week that would allow certain businesses with fewer than 50 full-time employees to offer health reimbursement arrangements (HRAs) of up to $5,130 for individual employees and $10,260 for employee families, without penalty.

After the Affordable Care Act (ACA) was enacted, the IRS ruled that HRAs used to reimburse employees who purchase health coverage on the individual market wouldn’t comply with the ACA annual dollar limit prohibition and would be subject to a $100 per-day per-employee penalty. H.R. 5447 is meant to remove the penalty and resurrect HRAs for certain small employers. It passed easily in a bipartisan voice vote. Sen. Chuck Grassley, R-Iowa, has introduced a companion bill in the Senate and has been pushing legislation in this area for more than a year. Although little if any tax legislation is expected this year, HRA legislation may be one of the few items that could find some bipartisan traction.

H.R. 5447, along with seven other health care-related bills, was originally approved by the Ways and Means Committee. Three others passed with bipartisan support in voice votes at the committee level:
  • H.R. 5456 — Allows states to use foster care funding for preventive services to keep children out of foster care
  • H.R. 5452 — Allows individuals enrolled in Indian Health Service programs to use health savings accounts (HSAs)
  • H.R. 210 — Exempts higher education students from the employer coverage excise tax

The full House also approved H.R. 5452 by voice vote, but no floor votes are currently scheduled for the other two bills.

The Ways and Means Committee passed four other health care bills on more partisan votes:
  • H.R. 5445 — Increases the contributions limit for HSAs and allows spousal “catch up” contributions
  • H.R. 5458 — Allows veterans enrolled in TRICARE to use HSAs
  • H.R. 3590 — Returns the adjusted gross income threshold for the itemized deduction from 10% to the pre-ACA threshold of 7.5%  H.R. 3080 — Exempts tribally owned businesses from the ACA employer coverage excise taxes

Democrats strongly criticized the costs of these bills, which would face strong opposition.

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