Proposed regulations (REG-136401-18[1]) have been issued by the IRS related to the integration of the shared responsibility payment under §4980H and certain nondiscrimination rules that apply to health reimbursement arrangement need due to the creation of individual coverage HRA in TD 9867.

The IRS provides the following initial justification for these proposed regulations:

Taking into account the comments received in response to Notice 2018-88, as well as comments received in response to the proposed integration regulations and proposed PTC regulations, the Treasury Department and the IRS propose the following regulations under sections 4980H and 105 to clarify the application of those sections to individual coverage HRAs and to provide related safe harbors to ease the administrative burdens of avoiding liability under section 4980H and avoiding income inclusion under section 105(h). These proposed regulations do not include any changes to the final integration regulations or the final PTC regulations.[2]

On January 20, 2017, newly inaugurated President Donald Trump signed Executive Order Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal, directing agencies to exercise the authority and discretion permitted to them by law to reduce burdens imposed by the Affordable Care Act. As well, shortly thereafter the IRS announced that it would accept tax returns where taxpayers did not indicate whether they had qualifying health insurance.

Many clients took this to mean that the penalties for failure to maintain health insurance that provided minimum essential coverage by individuals and the shared responsibility payments that are imposed on applicable large employers (ALEs) who fail to provide affordable minimum essential coverage to their employees would not apply for 2016. However, in information letters INFO 2017-10, INFO 2017-0013, and INFO 2017-0017 the IRS noted that the order did not actually change the law, and that the penalties will still apply to those taxpayers unless they meet another exception.

Individual Coverage HRA Proposed Regulations on Discrimination and Shared Responsibility Payment Issued by IRS

Executive Order Does Not Relieve Taxpayers of Shared Responsibility Penalties for 2016