Federal Register/Vol. 84, No. 119/Thursday, June 20, 2019/Rules and Regulations

28888 Federal Register / Vol. 84, No. 119 / Thursday, June 20, 2019 / Rules and Regulations DEPARTMENT OF THE TREASURY insurance coverage for which premiums SUPPLEMENTARY INFORMATION: are reimbursed by an individual I. Background Internal Revenue Service coverage HRA or a qualified small employer health reimbursement A. Executive Order 26 CFR Parts 1 and 54 arrangement (QSEHRA) does not On October 12, 2017, President [TD 9867] become part of an ERISA plan, provided Trump issued Executive Order 13813,1 certain safe harbor conditions are ‘‘Promoting Healthcare Choice and RIN 1545–BO46 satisfied. Finally, the Department of Competition Across the United States,’’ Health and Human Services (HHS) is DEPARTMENT OF LABOR stating, in part, that the ‘‘Administration finalizing provisions to provide a will prioritize three areas for special enrollment period (SEP) in the improvement in the near term: Employee Benefits Security individual market for individuals who Administration association health plans (AHPs), short- newly gain access to an individual term, limited-duration insurance coverage HRA or who are newly 29 CFR Parts 2510 and 2590 (STLDI), and health reimbursement provided a QSEHRA. The goal of the arrangements (HRAs).’’ With regard to RIN 1210–AB87 final rules is to expand the flexibility HRAs, the Executive Order directs the and use of HRAs and other account- Secretaries of the Treasury, Labor, and DEPARTMENT OF HEALTH AND based group health plans to provide HHS to ‘‘consider proposing regulations HUMAN SERVICES more Americans with additional options or revising guidance, to the extent to obtain quality, affordable healthcare. permitted by law and supported by 45 CFR Parts 144, 146, 147, and 155 The final rules affect employees and sound policy, to increase the usability of [CMS–9918–F] their family members; employers, HRAs, to expand employers’ ability to employee organizations, and other plan offer HRAs to their employees, and to RIN 0938–AT90 sponsors; group health plans; health allow HRAs to be used in conjunction insurance issuers; and purchasers of with nongroup coverage.’’ The Health Reimbursement Arrangements individual health insurance coverage. Executive Order further provides that and Other Account-Based Group DATES: expanding ‘‘the flexibility and use of Health Plans Effective date: These final rules are HRAs would provide many Americans, AGENCY: Internal Revenue Service, effective on August 19, 2019. including employees who work at small Department of the Treasury; Employee Applicability dates: The final rules businesses, with more options for Benefits Security Administration, generally apply for plan years beginning financing their healthcare.’’ Department of Labor; Centers for on or after January 1, 2020. However, the final rules under Code section 36B B. HRAs and Other Account-Based Medicare & Medicaid Services, Group Health Plans Department of Health and Human apply for taxable years beginning on or Services. after January 1, 2020, and the final rules 1. In General providing a new special enrollment ACTION: Final rule. An account-based group health plan period in the individual market apply is an employer-provided group health SUMMARY: This document sets forth final January 1, 2020. See Section VI of the plan that provides for reimbursement of rules to expand opportunities for SUPPLEMENTARY INFORMATION section for expenses for medical care (as defined working men and women and their more information on the applicability under Code section 213(d)) (medical families to access affordable, quality dates. care expenses), subject to a maximum healthcare through changes to rules FOR FURTHER INFORMATION CONTACT: fixed-dollar amount of reimbursements under various provisions of the Public Christopher Dellana, Internal Revenue for a period (for example, a calendar Health Service Act (PHS Act), the Service, Department of the Treasury, at year). An HRA is a type of account- Employee Retirement Income Security (202) 317–5500; Matthew Litton or based group health plan funded solely Act (ERISA), and the Internal Revenue David Sydlik, Employee Benefits by employer contributions (with no Code (Code) regarding health Security Administration, Department of salary reduction contributions or other reimbursement arrangements (HRAs) Labor, at (202) 693–8335; David contributions by employees) that and other account-based group health Mlawsky, Centers for Medicare & reimburses an employee solely for plans. Specifically, the final rules allow Medicaid Services, Department of medical care expenses incurred by the integrating HRAs and other account- Health and Human Services, at (410) employee, or the employee’s spouse, based group health plans with 786–1565. dependents, and children who, as of the individual health insurance coverage or Customer Service Information: end of the taxable year, have not Medicare, if certain conditions are Individuals interested in obtaining attained age 27, up to a maximum dollar satisfied (an individual coverage HRA). information from the DOL concerning amount for a coverage period.2 The The final rules also set forth conditions employment-based health coverage laws reimbursements under these types of under which certain HRAs and other may call the EBSA Toll-Free Hotline at arrangements are excludable from the account-based group health plans will 1–866–444–EBSA (3272) or visit the employee’s income and wages for be recognized as limited excepted DOL’s website (www.dol.gov/ebsa). In federal income tax and employment tax benefits. Also, the Department of the addition, information from HHS on purposes. Amounts that remain in the Treasury (Treasury Department) and the private health insurance coverage and HRA at the end of the year often may Internal Revenue Service (IRS) are coverage provided by non-federal finalizing rules regarding premium tax governmental group health plans can be 1 82 FR 48385 (Oct. 17, 2017). The executive credit (PTC) eligibility for individuals found on the Centers for Medicare & order was issued on October 12, 2017 and was offered an individual coverage HRA. In Medicaid Services (CMS) website published in the Federal Register on October 17, 2017. addition, the Department of Labor (DOL) (www.cms.gov/cciio), and information 2 See IRS Notice 2002–45, 2002–2 CB 93; Revenue is finalizing a clarification to provide on healthcare reform can be found at Ruling 2002–41, 2002–2 CB 75; and IRS Notice assurance that the individual health www.HealthCare.gov. 2013–54, 2013–40 IRB 287. VerDate Sep<11>2014 18:08 Jun 19, 2019 Jkt 247001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\20JNR2.SGM 20JNR2 jbell on DSK3GLQ082PROD with RULES2 Federal Register / Vol. 84, No. 119 / Thursday, June 20, 2019 / Rules and Regulations 28889 be used to reimburse medical care reorganized, amended, and added to the establishing for any individual any expenses incurred in later years, provisions of part A of title XXVII of the lifetime or annual limits on the dollar depending on the terms of the HRA. PHS Act relating to health coverage value of essential health benefits HRAs are not the only type of requirements for group health plans and (EHBs), as defined in PPACA section account-based group health plan. For health insurance issuers in the group 1302(b). PHS Act section 2711, example, an employer payment plan is and individual markets. The term however, does not prevent a group also an account-based group health ‘‘group health plan’’ includes both health plan, or a health insurance issuer plan. An employer payment plan is an insured and self-insured group health offering group or individual health arrangement under which an employer plans. insurance coverage, from placing an reimburses an employee for some or all PPACA also added section 715 to annual or lifetime dollar limit for any of the premium expenses incurred for ERISA and section 9815 to the Code to individual on specific covered benefits individual health insurance coverage, or incorporate the provisions of part A of that are not EHBs, to the extent these other non-employer sponsored hospital title XXVII of the PHS Act, PHS Act limits are otherwise permitted under or medical insurance. This includes a sections 2701 through 2728 (the market applicable law.8 reimbursement arrangement described requirements), into ERISA and the Code, HRAs are subject to PHS Act section in Revenue Ruling 61–146, 1961–2 CB making them applicable to group health 2711. An HRA generally will fail to 25, or an arrangement under which the plans and health insurance issuers comply with PHS Act section 2711 employer uses its funds directly to pay providing health insurance coverage in because the arrangement is a group the premium for individual health connection with group health plans. In health plan that imposes an annual insurance coverage or other non- accordance with Code section 9831(b) dollar limit on EHBs that the HRA will employer sponsored hospital or medical and (c), ERISA section 732(b) and (c), reimburse for an individual.9 insurance covering the employee.3 and PHS Act sections 2722(b) and (c) Other examples of account-based group and 2763, the market requirements do 8 For information regarding EHBs, see HHS’s health plans include health flexible not apply to a group health plan or a February 25, 2013 final rules addressing EHBs under PPACA section 1302 (78 FR 12834 (Feb. 25, spending arrangements (health FSAs) health insurance issuer in the group or 2013)); see also HHS Notice of Benefit and Payment and certain other employer-provided individual market in relation to the Parameters for 2016 (80 FR 10871 (Feb. 27, 2015)). medical reimbursement plans that are provision of excepted benefits described In addition, HHS issued final rules providing states not HRAs.4 in Code section 9832(c), ERISA section with additional flexibility to define EHBs, starting 733(c), and PHS Act section 2791(c).5 with plan years beginning on or after January 1, 2. Application of the Patient Protection 2020. See 45 CFR 156.111 (83 FR 16930 (April 17, See the discussion later in this preamble and Affordable Care Act to HRAs and 2018)).

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