MRA Account Disqualification for Subsidy

[kstein]

I have a client who worked at B of A and has about $8500 of funds left over from previous reimbursement.

Buried deep in her coverage letter is something that says having access to an MRA (med reimbursement acct) disqualifies her from getting a subsidy.
Anyone ever run across this? Any ways around it? She no longer gets funds put into the account either.

 

[MBSC]

If allowed by the previous employer, she should spend down the MRA by submitting expenses for reimbursement, including the full premium of a non-APTC plan. Once the MRA reaches $0, she qualifies for a SEP (loss of MEC) to an APTC plan.

Qualified medical expenses from your HRA include the following.

Amounts paid for health insurance premiums.

Source: https://www.irs.gov/publications/p969/ar02.html#en_US_2014_publink1000204203

Q: Are there any federal tax consequences if I have a balance remaining in a stand-alone medical HRA?

A: Yes. If you have a balance in a medical HRA (i.e. an HRA that covers more than just the limited excepted benefits), the IRS considers you to have "Minimum Essential Coverage." Because the Affordable Care Act requires each individual taxpayer to have Minimum Essential Coverage or pay a tax penalty, you will not be subject to this penalty.

Please note, however, that if you have Minimum Essential Coverage because you have a balance in a medical HRA, you are not eligible for federal premium assistance tax credits (subsidies) when purchasing insurance through Covered California for any month in which the medical HRA funds remain available. This is true regardless of whether you use the HRA funds to buy insurance through the exchange, use them for other reimbursable expenses, or do not use the funds at all.

Q.If I waive the remaining balance in a stand-alone medical HRA, will I be eligible for federal premium assistance tax credits to assist with purchasing health insurance through Covered California?

A: Yes, if you meet the federal eligibility criteria. If you voluntarily elect to waive your rights to any remaining pre-2014 medical HRA funds, meet certain residency, citizenship and income requirements, and do not have another source of Minimum Essential Health Coverage, you should be able to receive federal premium assistance tax credits in the following month.

Reference: O. HCSO and the Affordable Care Act | Office of Labor Standards Enforcement

 

[Ann H]

Excellent answer, MBSC.

 

[kstein]

Yes that helped out a lot thanks. We found she has $8200 in the account and gets $750/year from BoA for life so off exchange she goes.

Thanks for the info.