IRS Notice 2013-54

IRS Notice 2013-54 is the IRS guidance, issued September 13, 2013, that established the modern rule against stand-alone employer Health Reimbursement Arrangements (HRAs). The Notice clarified that an HRA is a group health plan subject to the Affordable Care Act’s market reform requirements — including the prohibition on annual dollar limits on essential health benefits and the requirement to provide preventive services without cost-sharing — and that an HRA reimbursing individual-market premiums could not, on its own, satisfy those requirements.

In practice, this meant employers could no longer offer a plain HRA to reimburse employees for individually purchased health insurance unless the HRA was integrated with a separate, ACA-compliant group health plan. Notice 2015-87 reaffirmed and elaborated the integration requirement, and the rule was codified at 26 CFR §54.9815-2711(d).

The landscape changed in 2019. The Departments of Treasury, Labor, and Health and Human Services issued the final regulations creating the Individual Coverage HRA (ICHRA) at 84 Fed. Reg. 28888 (June 20, 2019). The ICHRA rule provides a compliant integration pathway for an HRA to reimburse individual-market health insurance premiums and certain medical expenses, on the condition that each enrolled employee maintains qualifying individual coverage.

For employers today, the practical implication of Notice 2013-54 is straightforward: a plain stand-alone HRA is not a compliant option. Employers that want to reimburse individual-market premiums use an ICHRA (84 FR 28888); small employers (under 50 full-time-equivalent employees) may use a QSEHRA under IRC §9831(d) instead; an EBHRA can be offered alongside group coverage for limited expenses; and an integrated §105 HRA remains permissible when paired with an ACA-compliant group health plan.

Citations: IRS Notice 2013-54; IRS Notice 2015-87; 26 CFR §54.9815-2711(d); 84 Fed. Reg. 28888.

This page provides general information for plan sponsors and is not legal, tax, or compliance advice. Consult a qualified benefits attorney or tax advisor for situation-specific guidance, and verify all values against the most recent IRS Notice or Revenue Procedure before filing.