On February 27, 2017, the Internal Revenue Service issued Notice 2017-20 delaying the notice requirement for qualified small employer health reimbursement arrangements (“QSEHRAs”).  By way of background, prior to enactment of the 21st Century Cures Act (“Cures Act”) in December 2016, the Affordable Care Act prohibited HRAs unless they were integrated with group health plans.  This meant that HRAs could not be used to reimburse premiums purchased on the individual market.  The Cures Act created QSEHRAs so that small employers could offer non-integrated HRAs that would enable employees to, among other things, purchase individual market coverage. 

One of the requirements for QSEHRAs is that employees must receive a written notice no later than 90 days before the start of the plan year (or the start of eligibility for a new employee) describing the amount of reimbursement available under the QSEHRA and explaining that the employee must disclose the presence of the QSEHRA when applying for or renewing coverage purchased from the Marketplace. If an employer fails to provide the notice, the employer could face a penalty of $50 per employee per failure with a maximum penalty of $2,500.

Under the Cures Act, QSEHRAs in place on January 1, 2017 were required to provide this notice no later than March 13, 2017 (i.e., 90 days after enactment of the Cures Act). However, the IRS has not yet published regulations or other guidance governing the operation of these arrangements.  In the absence of guidance, the IRS issued Notice 2017-20 to delay the notice requirement and suspend potential notice penalties until the IRS issues further guidance.  Once guidance is issued, employers will have at least 90 days to provide the QSEHRA notice to employees.