Enforcement of Notice Penalty Also Delayed

The Internal Revenue Service (IRS) has extended the period for an employer to furnish an initial written notice to its eligible employees regarding a qualified small employer health reimbursement arrangement (QSEHRA) and has delayed associated penalties until further guidance is issued.

Background
The 21st Century Cures Act requires employers funding a QSEHRA for any year to provide a written notice to each eligible employee that includes information related to the employee's permitted benefit under the arrangement for the year and how the arrangement affects advance payment of the premium tax credit and the individual mandate.

The notice generally must be provided no later than 90 days before the beginning of a year in which the QSEHRA is funded--or, if an employee is not eligible to participate in the arrangement as of the beginning of such year, the date on which the employee is first eligible.

While the law imposes a penalty for failing to timely furnish eligible employees with the required written QSEHRA notice, it further provides that an eligible employer that provides a QSEHRA for a year beginning in 2017 will not be treated as failing to timely furnish the initial written notice if it is furnished to eligible employees no later than March 13, 2017.

Transition Relief
The IRS has announced its intention to issue additional guidance concerning the contents of the written notice in the near future. Until the issuance of such guidance, employers that provide QSEHRAs for years beginning in 2017 are not required to furnish the initial written notice to eligible employees, and no penalties will be imposed for failure to provide the notice. Employers that furnish the QSEHRA notice to eligible employees before further guidance is issued may rely upon a reasonable good faith interpretation of the 21st Century Cures Act to determine the contents of the notice.

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