HRA Notice Requirements: Deadlines, Content, and Penalties

If you offer a Health Reimbursement Arrangement, HRA notice requirements set a firm deadline: eligible employees must receive a written notice at least 90 days before the start of each plan year, and a new hire who becomes eligible mid-year must get the notice no later than their eligibility date. The required content differs depending on whether you run a Qualified Small Employer HRA (QSEHRA) or an Individual Coverage HRA (ICHRA), and so do the penalties for getting it wrong: $50 per employee with a $2,500 annual cap for a QSEHRA, versus $100 per day per affected individual for an ICHRA.

QSEHRA Notice: Deadline and Required Content

A QSEHRA is available only to employers with fewer than 50 full-time employees that do not offer a group health plan.¹ Each eligible employee must receive the written notice no later than 90 days before the plan year begins. For someone who becomes eligible after the plan year is already underway, the notice must go out no later than the date they first become eligible to participate.² The statute says “each year,” so this repeats annually even when nothing has changed.

The notice must include three items:²

The permitted benefit amount — the maximum reimbursement available to that employee for the plan year.
A statement telling the employee to share their QSEHRA benefit amount with the Health Insurance Marketplace if they apply for advance premium tax credits.
A statement that reimbursements may be included in the employee’s taxable income for any month they lack minimum essential coverage.

The last point confuses some employers. The federal individual mandate penalty dropped to $0 in 2019, but the tax treatment of QSEHRA reimbursements is a separate rule. If an employee doesn’t carry qualifying coverage, reimbursements they receive become taxable income, and the notice has to say so.

Employees You Can Leave Off the Notice

A QSEHRA can exclude employees who haven’t completed 90 days of service, employees under age 25 at the start of the plan year, part-time or seasonal workers, certain collectively bargained employees, and nonresident aliens with no U.S.-source earned income.¹ If someone falls into one of those categories and your plan documents actually exclude them, no notice is owed. The exclusions must be written into the plan terms and applied uniformly.

ICHRA Notice: Deadline and Required Content

An ICHRA is available to employers of any size and can run alongside a traditional group plan if different employee classes are kept separate. The core condition for employees: they must be enrolled in their own individual health insurance or Medicare to participate.

The deadline mirrors the QSEHRA. The notice is due at least 90 calendar days before each plan year begins, or by the date the ICHRA first takes effect for a mid-year eligible employee. The same shortened timing applies to employers established less than 120 days before their first plan year.³

Content requirements are more detailed than for a QSEHRA. The notice must cover:³

The maximum dollar amount available for the plan year, including the self-only HRA amount and any variation by family size or age.
Proration rules for employees not eligible for the full plan year.
Whether dependents can also receive reimbursements through the HRA.
A clear statement that the employee and any covered dependents must be enrolled in individual health insurance or Medicare to receive reimbursements, and that short-term or limited-duration insurance doesn’t count.
How and when a participant can opt out of the ICHRA.⁴
A statement that accepting the ICHRA and improperly claiming premium tax credits could create a tax liability, along with information the Marketplace will need to determine credit eligibility.⁴

The Department of Labor publishes a model notice covering each element. You are not required to use it verbatim, but it is the safest starting point because it was designed to satisfy the Treasury, Labor, and HHS rules that jointly govern ICHRAs.

Delivering the Notice Electronically

Paper delivery always works. Email or an online portal is allowed under ERISA with conditions that depend on the recipient.⁵

Employees whose jobs require regular access to the employer’s computer system, such as office workers using a company email account daily, can receive notices electronically without separate consent. Everyone else — warehouse staff, field workers, anyone who doesn’t routinely use employer-provided electronic systems — must give affirmative consent first, in a way that shows they can actually open documents in the format you plan to use.

Regardless of category, electronic delivery must meet four conditions:

Take steps to confirm the notice was received, such as using read receipts or monitoring undeliverable messages.
Protect the confidentiality of personal information.
Tell the employee what the document is and why it matters, if that isn’t obvious from the transmission.
Provide a paper copy on request.

If your workforce includes people who don’t sit at computers, don’t assume you can email the HRA notice and move on. Get written consent or hand them paper.

Penalties for Late or Missing Notices

The penalty structure splits sharply by HRA type.

ICHRA Failures Under Section 4980D

An ICHRA is a group health plan subject to the market reform requirements in Chapter 100 of the Internal Revenue Code. Failing to meet those requirements, including the notice obligation, triggers an excise tax of $100 per day for each affected individual.⁶ Over a full year that reaches $36,500 per person.⁷ An employer with 10 affected employees and a year-long failure is looking at $365,000.

The tax is self-reported, not assessed by the IRS in an audit. Employers file IRS Form 8928 by the filing deadline for the employer’s federal income tax return. An automatic extension is available by filing Form 7004 before the regular due date, though the extension covers filing only, not payment. Late filing of Form 8928 itself carries a penalty of 5% of the unpaid tax per month, up to 25%.⁸

QSEHRA Failures Under Section 6652(o)

QSEHRA notice failures carry a much lighter penalty: $50 per employee for each failure, capped at $2,500 per calendar year.⁹ The cap makes this one of the more forgiving penalties in benefits compliance. It can be waived if the failure was due to reasonable cause and not willful neglect.

A separate risk sits behind the dollar figure. If notice problems cause the arrangement to lose its status as a QSEHRA, reimbursements may become taxable income for employees and lose their payroll tax exemption for the employer.

ICHRA Escape Valves Worth Knowing

Section 4980D numbers look alarming on their face, but the statute includes meaningful relief.

No tax applies for any period during which you didn’t know about the failure and wouldn’t have discovered it through reasonable diligence. That won’t help if you simply forgot to send notices, but it protects employers whose third-party administrator failed to distribute them without the employer’s knowledge.¹⁰

If the failure was due to reasonable cause and not willful neglect, and you correct it within 30 days of discovering it (or when you should have discovered it), no excise tax applies. Most small employers who send a late notice promptly after catching the mistake land in this safe harbor.¹⁰

When failures are due to reasonable cause and not willful neglect, total excise tax for a single-employer plan during the taxable year cannot exceed the lesser of 10% of what the employer spent on group health plans in the preceding year or $500,000.¹⁰ For a small employer spending $50,000 a year on HRA benefits, annual exposure caps at $5,000 instead of hundreds of thousands.

Related Reporting: W-2 for QSEHRAs

QSEHRA benefits create a separate reporting obligation at tax time. Employers must report the total permitted benefit for each employee in Box 12 of Form W-2 using Code FF.¹¹ The amount reported is the maximum the employee was entitled to receive for the year, not what they actually claimed. Prorate the figure for anyone who became eligible partway through the year. Carryovers from prior years are not included in the current year’s reporting.

The Marketplace uses the W-2 figure to reconcile premium tax credits. Skip this reporting and employees may face unexpected tax bills when the IRS catches the gap.

COBRA Notices for ICHRAs

ICHRAs are group health plans, which brings COBRA into play for employers with 20 or more employees. Employers with fewer than 20 employees, and churches or religious tax-exempt organizations, generally fall outside federal COBRA for their HRA.

For everyone else, COBRA layers two notices on top of the regular ICHRA notice. A general COBRA rights notice must go to each employee and covered spouse within 90 days of the ICHRA’s start date, either inside the summary plan description or as a standalone document. After a qualifying event such as termination or a reduction in hours, the employer has 30 days to notify the plan administrator, and the plan administrator has 14 days from that point to send the former employee a COBRA election notice. Smaller employers who serve as their own plan administrator get the full 44-day window from the qualifying event to deliver the election notice.¹²

A former employee who elects COBRA continuation of the ICHRA pays the full cost of the benefit plus a 2% administrative fee, calculated using either a past-cost method based on average usage from the prior plan year or an actuarial estimate of future usage.

Keep Proof You Sent It

Sending the notice is only half the obligation. You also need to prove you sent it. ERISA requires plan administrators to keep records of participant disclosures for at least six years from the date of filing. That means copies of the notices, proof of delivery such as mailing receipts, email confirmations, or signed acknowledgments, and the related plan documents.

For employers running the plan internally, the simplest approach is to keep a dated copy of each notice alongside documentation showing when and how it was delivered to each employee. Electronic records are fine as long as they’re accessible and protected against tampering. If a dispute surfaces years later over whether an employee got the proper notice, organized records settle it quickly; memory does not.

1
Internal Revenue Service. Internal Revenue Service Notice 2017-67 – Qualified Small Employer Health Reimbursement Arrangements
2
Office of the Law Revision Counsel. 26 US Code 9831 – General Exceptions
3
eCFR. 29 CFR 2590.702-2 – Special Rule Allowing Integration of Health Reimbursement Arrangements With Individual Health Insurance Coverage and Medicare
4
U.S. Department of Labor. Individual Coverage HRA Model Notice
5
eCFR. 29 CFR 2520.104b-1 – Disclosure
6
Office of the Law Revision Counsel. 26 US Code 4980D – Failure to Meet Certain Group Health Plan Requirements
7
Internal Revenue Service. Employer Health Care Arrangements
8
Internal Revenue Service. Instructions for Form 8928
9
CCH AnswerConnect. 26 USC 6652(o) – Failure to Provide Notices With Respect to Qualified Small Employer Health Reimbursement Arrangements
10
Office of the Law Revision Counsel. 26 USC 4980D – Failure to Meet Certain Group Health Plan Requirements
11
Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3
12
Centers for Medicare & Medicaid Services. COBRA Continuation Coverage Questions and Answers