Written notice deadline extended for qualified employer HRAs

In Notice 2017-20, the IRS extended the deadline to provide a required written notice to eligible employees of an employer that offers a qualified small employer health reimbursement arrangement (QSEHRA).

The 21st Century Cures Act, enacted on Dec. 13, 2016, added Section 9831(d) to the code to allow eligible small employers to offer QSEHRAs to employees without violating the market reforms established by the Affordable Care Act (ACA). Eligible small employers include employers with fewer than 50 full-time employees plus full-time equivalent employees that do not offer a group health plan to any of their employees. Prior to the enactment of Section 9831(d), employers could not offer standalone health reimbursement arrangements to employees without violating the prohibition on offering health coverage with annual dollar limits. This violation would result in a penalty for the employer equal to $100 per day per employee.

Under a QSEHRA, after an eligible employee provides proof of coverage, payments or reimbursements may be made to that eligible employee for expenses for medical care and insurance premiums incurred by the employee and his or her family members. An employer who sponsors a QSEHRA is required to furnish a written notice to its eligible employees at least 90 days before the beginning of a year for which the QSEHRA is provided. A special notice period applies to newly eligible employees. For years beginning after Dec. 31, 2016, the employer is generally subject to a $50 penalty per employee per incident for failure to provide the notice, with a $2,500 maximum penalty per year. The legislation set the deadline for providing the notice for QSEHRAs offered in 2017 as 90 days after the enactment of the legislation.

In Notice 2017-20, the IRS indefinitely extended the written notice deadline for QSEHRAs offered to employees for a year beginning in 2017. The written notice deadline will be established when future guidance is issued by the IRS concerning the contents of the notice. No penalty will be imposed for failure to provide the initial notice before the extended deadline specified in that guidance.

Eddie Adkins
Partner, Washington National Tax Office
+1 202 521 1565

Jeff Martin
Senior Manager, Washington National Tax Office
+1 202 521 1526

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