Employers increasingly turn to Individual Coverage Health Reimbursement Arrangement (ICHRA) as a flexible, cost-effective alternative to traditional group health insurance. ICHRA is a versatile benefit and can reimburse Individual Health Insurance Premiums. If the Employer would like, it can also contribute to employees’ out-of-pocket expenses, copays, and deductibles. However, ICHRA administration, and the complex rules surrounding it, can be overwhelming and tough to navigate. Employers that want to simplify compliance should partner with an experienced ICHRA administrator like Flyte HCM.
With the adaptation of ICHRA exceeding the initial estimations projected by the Department of Health and Human Services, many Benefits Brokers and Administrators are jumping in to assist their clients and employers with various ICHRA processes and offerings, including assisting with ICHRA Initial Notices, the legal Plan Documents, Section 125 plan assistance, and shopping for Individual Policies.
ICHRA came to fruition in 2020 as a Group Health Benefit Category regulation. unlike its predecessor, the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), ICHRA can layer in plans such as a Health Savings Account, Flexible Spending Account, Cafeteria Plans, and Section 125 Pretax Plans.
The availability of these options creates numerous possibilities for tax savings through salary reductions, payroll tax liabilities, and tax-free money for individual premiums. Most employers would agree: Why would I not implement an ICHRA benefits package with tremendous cost savings over traditional group health plans and the pretax savings? It’s a win-win.
Because ICRHA is considered a self-funded group health plan, there are ERISA and IRS guidelines to adhere to. These rules include COBRA, HIPPA, PHI, PICORRI, and certain ACA requirements with specific notifications to employees, year-end reporting to the IRS, and certain state reporting annually.
Of the alphabet soup listed above, compliance with the Employee Retirement Income Security Act (ERISA) is non-negotiable. This federal law establishes standards for retirement and health plans in the private sector to safeguard individuals enrolled in these plans. Employers must ensure they comply with these requirements, otherwise they are jeopardizing their plan status, resulting in revoking the employer-sponsored plan(s), Leaving a big tax bill at year-end and prior years for both the Employer and their employees on all revoked plans.
Finding the Right ICHRA Administrator
While some employers may attempt to handle ICHRA administration independently, the complex regulatory landscape can be time-consuming and challenging.
There are many moving parts to consider in ICHRA administration:
- ICHRA Plan Design – what class of employee will be eligible, when, and what is their reimbursement arrangement?
- Will other ERISA Plans be layered in, such as an Employee-owned Health Savings Account, Flexible Spending Account (Limited Scope, Dependent Care, or Commuter), or a Café Plan?
- Customized ICHRA Initial Notice, Legal Plan Documents, and Summary Plan Descriptions
- Open Enrollment for your ICHRA Plan – Eligible Employees not only need to shop for insurance, but they must opt-in or out of the Employer’s ICHRA Plan. Employers will need to keep this enrollment data on file.
- Reimbursement substantiation (under HIPPA and PHI Compliance) must be maintained by the plan fiduciary and stored securely for seven years.
- COBRA – For employers with 20 or more employees this must be in place to comply with federal law. Smaller employers may also have to implement mini-COBRA or state continuation based on what state they are in. While employees may not elect COBRA on their premium reimbursement, they could elect to continue their HRA portion of ICHRA and FSAs if offered.
- ACA Compliance – ICHRA is considered a self-insured group health plan. As such, ACA reporting requires large and small employers alike to report. ICHRA ACA reporting is much more complex, with double the codes for ALE Large Employer reporting.
By partnering with an ICHRA administrator, employers can save time and money, ensure compliance with regulations, and provide their employees with a comprehensive benefits package. Partnering with an external ICHRA expert, such as Flyte HCM, can yield significant time and cost savings while ensuring your employer-sponsored health plan is compliant.