As described in our prior alert,the 21st Century Cures Act (“Cures Act”) allows employers with fewer than fifty employees that do not offer health plans to establish stand-alone health reimbursement arrangements (“HRAs”) to reimburse employees for medical expenses or health insurance purchased on the exchange or otherwise. Those HRAs must, however, satisfy certain conditions. An HRA that satisfies all the required conditions is referred to as a Qualified Small Employer HRA, or “QSEHRA.”

One condition requires the employer to furnish a written notice that contains certain required content to eligible employees at least 90 days before the beginning of a year for which the QSEHRA is provided (or for newly eligible employees, such as new hires, the date the employee is first eligible). Beginning after 2016, an employer that fails to provide the notice can be penalized up to $50 per employee (up to a maximum of $2,500 per calendar year). The Cures Act provided relief for employers who want to establish a QSEHRA for 2017. Under that statutory relief, employers have until March 13, 2017 to provide the notice.

In IRS Notice 2017-20, the IRS has provided even more relief. Under Notice 2017-20, an eligible employer that provides a QSEHRA to its eligible employees for years beginning in 2017 will not be required to furnish the initial written notice until after the IRS has issued further guidance. That further guidance will specify a deadline for providing the initial written notice, which will be no earlier than 90 days following the issuance of the guidance. No penalties will be imposed for failure to provide the initial written notice before the extended deadline. Employers may, however, furnish a notice if they want. Those that do can rely on a reasonable good faith interpretation of the statute to determine the contents that should be included in the notice.