New IRS And Treasury Guidance On Safe Harbors For HRAs

On November 19, the Internal Revenue Service (IRS) issued Notice 2018-88. This notice requests comment on a number of new safe harbors for the employer mandate and Section 105(h) of the Internal Revenue Code in light of the recent proposed regulation on health reimbursement arrangements (HRAs) and other account-based group health plans. As proposed, the new rule would allow HRAs to be used to fund premiums and out-of-pocket costs for individual health insurance coverage for plans beginning on or after January 1, 2020.

Notice 2018-88 is complex but designed to make it easier for employers to offer an individual HRA under the proposed HRA rule (assuming it is finalized without significant changes). Notice 2018-88—and the positions taken by the IRS and Treasury Department in the guidance—could have significant consequences for whether employers opt to move forward with offering individual HRAs to employees. Comments on Notice 2018-88 are due on December 28, 2018 and will inform guidance and future regulations that address these topics.