On December 13th, President Obama signed the 21st Century Cures Act. This legislation establishes a new type of HRA for small employers that do not offer health coverage - known as “Qualified Small Employer Health Reimbursement Arrangements.”
With this new arrangement, small employers will be able to reimburse employees for premiums for health insurance and other qualified health expenses. This becomes effective in January and it also allows small employers to either partially or fully reimburse employees for individual health insurance premiums (and other medical expenses at the employer’s discretion) without violating ACA market reforms or incurring daily excise tax penalties.
There are some restrictions with respect to these new HRAs, these include:
More information should become available after more of the legislation becomes known and as this product is rolled out.
IRS Notice 2015-17 previously provided transition relief from the assessment of excise taxes to small employers who reimbursed, or paid directly the premium for an individual employee's heath insurance policy which are also known as "employer payment plans". This relief has been extended due to the 21st Century Cures Act, which expired on June 30, 2015, to any plan year beginning on or before December 31, 2016.