When the 21st Century Cures Act was passed in December 2016, small businesses welcomed the creation of a new compliant Health Reimbursement Arrangement (HRA). The Small Business HRA allows companies with fewer than 50 employees to reimburse individual health insurance premiums and qualified medical expenses for their employees, as well as their employees’ spouses and dependents.
Alongside the benefits of a Small Business HRA come a few responsibilities, however—including a requirement that companies offering the benefit provide a 90-day notice to their employees every year.
In this post, we’ll examine the law’s notice requirements in depth so that your business can comply with federal law while giving your employees access to a benefits plan that meets their needs.
What is the Small Business HRA Notice?
The Small Business HRA notice is a communication you must send to your employees every year informing them of certain details and rules applicable to their benefit.
The 21st Century Cures Act contains specific requirements relating to the notice. Under the law, each notice must:
Inform the employee of his/her benefit amount for the year;
- Instruct the employee to share the benefit amount with any
- Exchange/Marketplace if he/she is applying for a premium tax credit; and
- Explain that the employee could be subject to a tax penalty under IRS Section 5000A if he/she fails to maintain minimum essential coverage during the year.
Your business will be fined $50 per employee (capped at $2,500 per year) if you fail to provide this notice.
Tip—For more information on the 21st Century Cures Act and the Small Business Healthcare Relief Act that governs the Small Business HRA, see our in-depth guide.
How the 90-Day Notice Works
The 21st Century Cures Act also contains instructions on the timing of the notice. According to Title 18, Section 4(A), you must send your employees the Small Business HRA notice at least 90 days before the start of each calendar year in which you’ll offer the benefit.
As an example, let’s say you’re going to offer the Small Business HRA in 2018. In order to comply with the law, you would need to send the formal notice to your employees by October 3, 2017. You would need to do the same in 2018 if you plan to continue the benefit into 2019.
There are also rules for notifying employees who become eligible for the Small Business HRA mid-year. In these cases, you must supply the employee with the notice before or on the day he or she becomes eligible. If you have an employee become eligible July 1, 2018, for example, you must send the employee the Small Business HRA notice before or on that date.
Your Requirements When Starting a New Small Business HRA
If you’re offering the Small Business HRA for the first time, you’re still responsible for sending a notice to your employees. This notice may be sent at any point prior to, and including, the day your Small Business HRA goes into effect.
In other words, your notice requirements for a new Small Business HRA are the same as your requirements for an employee that becomes eligible mid-year.
Let’s look at another example. This time, let’s say you plan to implement a brand new Small Business HRA with an effective date of June 1, 2017. In this case, you must send the notice to all employees on or before June 1 – the day on which all employees are first eligible.
Wherever possible, of course, you should supply employees with as much notice as you can of your decision to offer a Small Business HRA. This is a new benefits arrangement that will be unfamiliar for many of your employees, and taking the time to explain the details of your new offering will help them feel more comfortable and even excited about the arrangement.
Transition Relief Under the Law
Because the Small Business HRA is a brand new benefit, the law is providing transition relief regarding notice requirements.
The 21st Century Cures Act states that companies offering the Small Business HRA will not be subject to the $50 per employee penalty for 90 days after the passage of the legislation. Because the law was passed December 13, 2016, companies have until March 13, 2017 before they can be fined for failing to meet notice requirements.
Offering the Small Business HRA Compliantly
The 21st Century Cures Act is very specific about a company’s notice requirements when offering a Small Business HRA. If your company fails to meet these requirements – either on timing or on the contents of the notice – you could be subject to penalties of up to $2,500 per year.
For these and other reasons, many companies offering a Small Business HRA have chosen to use an HRA software administration tool. The right tool will provide you with compliant notices and send them out to employees automatically, each time they are required by law.
This will give you peace of mind as well as the gratitude of your employees, who appreciate good communication on their benefits.
Do you have any questions about Small Business HRA notice requirements? Let us know in the comments below!