21st Century Cures Act
January 6, 2017


The 21st Century Cures Act (Act), recently signed into law, has numerous components; however, an important change is the creation of the Qualified Small Employer Health Reimbursement Arrangement (HRA).  This allows small employers to reimburse individual health coverage premiums up to a dollar limit.  Previously, these types of employer payment plans were often unable to meet all of the Affordable Care Act’s (ACA) requirements.

What is an HRA?

An HRA is an arrangement where an employer may reimburse medical expenses of the employee up to a certain amount per year, with the unused amounts rolling over for use in future years.  This reimbursement is usually in the form of payments towards insurance premiums.

Why is this beneficial?

The amounts reimbursed to an employee are now excludable from the employee’s income up to a certain limit and an HRA is not subject to COBRA or ERISA. The employer and the employee will save FICA & Medicare taxes on this excluded income.

Who is eligible?

The Act applies to employers with less than fifty full-time employees and that currently do not offer group health insurance.  A written notice must be provided to eligible employees 90 days prior to the year of implementation.  Furthermore, if an employer adopts an HRA they are subject to ACA reporting, such as Form 1095-B.


The limit per individual is $4,950 annually and for a family the limit is $10,000 annually.  For the employee the amount paid for by the employer will be a factor in the income calculation of the employee for purposes of the premium tax credit.  This may alter the amount of subsidy provided in the marketplace exchange.

When will this go into effect?

The provision is effective as of January 1, 2017.

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