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Summary of Benefit Coverage Requirements for Health FSAs and HRAs

Does an employer have to provide a copy of the Summary of Benefits and Coverage (“SBC”) to enrollees of Health Flexible Spending Accounts (“Health FSA”) or Health Reimbursement Arrangements (“HRA”)?

The SBC requirement applies to group health plans (both insured and self-insured) and insurers (as defined by applicable provisions of the PHSA, ERISA, or the Code) but not to certain “excepted benefits,” PHSA § 2715(a), as added by PPACA, Pub. L. No. 111-148 (2010). Grandfathered group health plans must comply with this mandate, as provided in PPACA, Pub. L. No. 111-148, § 1251(a)(3) (2010), as amended by PPACA, Pub. L. No. 111-148, § 10103(d)(1) (2010).

When is a Health FSA or a HRA considered an excepted benefit?

Health FSA:
A health FSA is considered an excepted benefit for a “class of participants” if the health FSA is a health FSA under Code Section 106(c)(2) and satisfies two conditions:
*Maximum Benefit Condition: The maximum benefit payable under the health FSA to any participant in the class for a year cannot exceed two times the employee’s salary reduction election under the health FSA for the year (or, if greater, the amount of the employee’s salary reduction election for the health FSA for the year, plus $500), as provided in Treasury Regulations Section 54.9831-1(c)(3)(v)(B);DOL Regulations Section 2590.732(c)(3)(v)(B);HHS Regulations Section 146.145(c)(3)(v)(B); and

*Availability Condition: Other nonexcepted group health plan coverage (e.g., major medical coverage) must be made available for the year to the class of participants by reason of their employment, as provided in Treasury Regulations Section 54.9831-1(c)(3)(v)(A);DOL Regulations Section §2590.732(c)(3)(v)(A); HHS Regulations Section146.145(c)(3)(v)(A).

Neither the regulations nor the preamble to the regulations explains what is meant by the term “class of participants.” The term appears to preclude a “participant-by-participant” approach to determining whether benefits under a health FSA are excepted benefits.

Examples of Health FSA Funding That Meet the Maximum Benefit Condition:

* A one-for-one employer match (employer $600, employee $600).
* An employer contribution of $500 or less (employer $500, employee $200).
Examples of Health FSA Funding That Do Not Meet the Maximum Benefit Condition:
* An employer contribution of more than $500, if employee contributes $500 or less (employer $600, employee $400).
* An employer contribution in excess of one-to-one match, if employee contributes more than $500 (employer contributes $700, employee contributes $600).

Remember: Health FSAs funded exclusively by employee salary reduction contributions (with annual coverage capped by the amount of the annual salary reduction election) will, by definition, satisfy the Maximum Benefit Condition.


A 100% employer-paid stand-alone HRA with an annual limit less than or equal to $500 and no carryovers will be considered an excepted benefit if the employer makes major medical insurance available to all employees who are eligible for the HRA. This is the same requirements as provided above for Health FSAs. This is because such an HRA may be considered a health FSA and would qualify as an excepted benefit. Likewise, a retiree-only HRA or limited-purpose HRA (i.e., that provides only vision and dental benefits) would also be considered an excepted benefit .

The above HIPAA exceptions will not apply to most HRAs. HRAs that can be used for medical expenses generally and that permit carryovers or that provide an employer-funded benefit of more than $500 will not be considered excepted benefits.

American Benefits can create SBCs for non excepted FSAs and HRAs. Contact your benefits administrator or support@amben.com

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