8884 / Does an employer's contribution to a cafeteria plan or HRA impact whether health coverage is "affordable" under the Affordable Care Act?

The IRS has released final regulations that address the impact of employer contributions to cafeteria plans and health reimbursement arrangements (HRAs) upon the affordability of coverage and the employee's required contribution toward health coverage.

Pursuant to these regulations, an employee's required contribution toward health coverage is reduced by the amount of any employer contribution to an IRC Section 125 cafeteria plan that (1) may not be taken as a taxable benefit, (2) may be used to pay for minimum essential health coverage and (3) may only be used to pay for medical care.¹

Employer contributions to an employee's HRA are used in determining the level of the employee's required contributions if the HRA is integrated with an employer-sponsored health plan and the employee is permitted to use the contributions to pay premiums. Further, the HRA amounts will count toward the employee's required contribution if the HRA would have been integrated with an employer-sponsored plan if the employee had enrolled in the primary health plan offered by that employer.²

The HRA funds are only taken into account in determining the employee's required contribution if both the HRA and the primary health plan are offered by the same employer.³