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Ask Lane Your Own Question
Category: Tax
Satisfied Customers: 12459
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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My name is***** recently signed up with Zane Benefits with the understanding that this

Customer Question

My name is***** recently signed up with Zane Benefits with the understanding that this was a viable alternative to our group insurance plan. I now find out that the IRS may disallow and penalize myself.
Submitted: 2 years ago.
Category: Tax
Expert:  PDtax replied 2 years ago.
Welcome to the site. I'm PDtax, and will be helping you today.
I know Zane offers HSA accounts, health savings accounts. Their offering might be ok with ACA, but I would need to know what you have ans what issues IRS has with your plan.
The number of covered employees, including any amounts you pay for these benefits, will help, too.
Customer: replied 2 years ago.
I have 6 employees and the amount I pay varies depending on their class.
Customer: replied 2 years ago.
The question is whether this plan is legal, will the IRS impose penalties. There is considerable numbers of articles on the web regarding this.
Expert:  PDtax replied 2 years ago.
You haven't told me the type of coverage, who pays the premiums, or what issues IRS has with your plan.
I can't help without more information, including the IRS issues raised.
I will opt out. Other experts can review your request and assist.
Customer: replied 2 years ago.
(Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call. Let me know if you need more information, or send me the service offer(s) so we can proceed.
Expert:  Lane replied 2 years ago.
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.
Expert:  Lane replied 2 years ago.
Just checking back in.
Didi you have a chance to check with Zane to see where you have an HRP as opposed to an HRA?
Let me know...