The classic HRA (Health Reimbursement
arrangement) no longer works (is out of compliance
with ACA) as of 2014.
HOWEVER, a very specific plan (called a HRP) Health Reimbursement Plan IS in compliance, not only with ACA, but also ERISA
(enforced/administered by DOL) AND with the tax
code (enforced/administered by IRS).
If THIS is the type of plan you have .. AND ... if the policies paid for are compliant under ACA (marketplace plans for example) ... AND ... if the administration
is done properly (For example, A key distinction between an HRP and an HRA is that an HRP does not impose a plan-wide maximum annual benefit and does not allow annual roll-over.)
An HRP is a type of Section 105 self-insured medical
reimbursement plan designed to reimburse employees for individual
health insurance premiums tax-free. If structured correctly, an HRP can comply with PHS Act 2711 and PHS Act 2713.
In my experience many CPAs out there only know that the HRA doesn't work any more. They do NOT realize that the HRP solution is there.
I would call Zane and ask if this is SPECIFICALLY an HRP and NOT an HRA.
If it's an HRP and they are doing all of the administration, and you understand the risk this still works.
For example, an HRP must cover all preventive care costs. To help limit the preventive care liability, an employer could require employees to show proof of having non-grandfathered minimum essential coverage to be eligible for the HRP. That way, the employee receives 100% preventive care services via their own health insurance plan (e.g. an individual plan or spouse’s employer plan).
Section 105 medical reimbursement plans can still reimburse individual health insurance premiums tax-free. However, they must be structured to comply with ACA Market Reforms (specifically, no annual limits on essential health benefits and coverage for basic preventive services). IRC Section 125 has changed, but IRC Section 105 has not.