The U.S. Treasury Department and IRS today released for publication in the Federal Register proposed regulations (REG-136401-18) intended to:
Read the proposed regulations [PDF 406 KB] (20 pages) as published in the Federal Register on September 30, 2019.
Comments and requests for a public hearing are due 90 days after September 30, 2019 (the date when the proposed regulations will appear in the Federal Register).
The IRS in November 2018 issued Notice 2018-88, requesting comments on potential approaches developed by the IRS and Treasury Department so employers would understand how to structure integrated HRAs to avoid assessable payments (section 4980H) and potential loss of the exclusion from income for employer-provided health benefits (section 105(h)). Notice 2018-88 stated that proposed regulations would:
According to the preamble to today’s proposed regulations, Treasury and the IRS have taken into account the comments received in response to Notice 2018-88, as well as comments received in response to the proposed integration regulations and proposed PTC regulations.
Today’s proposed regulations under sections 4980H and 105 are intended to clarify the application of those provisions to individual-coverage HRAs and to provide related safe harbors to ease the administrative burdens of avoiding liability under section 4980H and avoiding income inclusion under section 105(h).
The proposed regulations, in part, address:
The proposed regulations under section 4980H are proposed to apply for periods beginning after December 31, 2019.
The proposed regulations under section 105(h) are proposed to apply for plan years beginning after December 31, 2019.
The preamble notes that employers may need guidance with respect to sections 4980H and/or 105(h) to design and implement programs involving individual coverage HRAs prior to the issuance of any final regulations and in advance of the plan year for which the individual coverage HRAs will be offered. Accordingly, to allow employers to offer individual coverage HRAs beginning on January 1, 2020, the preamble states that:
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