ICHRA Rules: What You Need to Know
Understanding the ins and outs of a compliant ICHRA plan
An individual coverage health reimbursement arrangement, or ICHRA, is a new form of health reimbursement arrangement (HRA) that was established by the federal government in 2019. Through this model, employers of any size can reimburse their employees for any out-of-pocket healthcare costs. Businesses can cover medical expenses and health insurance premiums tax-free, and employees can select whatever insurance policies meet their needs.
These ICHRA plans do come with some specific rules.
When it comes to ICHRA rules, here’s what you need to know:
ICHRA Rule #1.
Must have an Individual Policy to receive reimbursements.
Participants in an ICHRA must be covered by individual health insurance plans. Policies purchased through Health Insurance Marketplaces (on-exchange plans) are reimbursable, as are those purchased elsewhere (off-exchange plans). Medicare Parts A, B, and C are eligible as well. It is also acceptable for an employee to be reimbursed for expenses as a non-primary policyholder of a family member’s individual policy.
ICHRA Rule #2.
Employees are required to receive an
Initial Notice in advance.
Prior to each plan year, you must provide a 90-day notice to employees to inform them that they can participate. This Notice must include how Individual coverage impacts the premium tax credits, who is eligible, and the employer contribution amounts.
ICHRA Rule #3.
Individual coverage must be verified.
Any employee enrolling in the ICHRA must prove that they are enrolling in an individual policy before employer contributions can be distributed. This requires employers to verify their employees’ coverage status and employee attestation before any funds can be dispersed. This verification can feel daunting… That’s why having a partner like Flyte HCM alongside you to help administer your ICHRA plan can be so helpful.
ICHRA Rule #4.
Employers can limit ICHRA eligibility
to certain classes.
Eligibility for an ICHRA and a group health plan cannot overlap. However, you can make an ICHRA available to categories of employees that are ineligible for your group plan. The 11 ways employees can be classified are as follows:
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Salaried
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Hourly
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Full-time
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Part-time
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Seasonal
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Those within a waiting period
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Those working via temp agencies
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Geographically dispersed employees in different rating areas
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Those who fall within collective bargaining agreements
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Employees working outside the United States
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Those meeting various combinations of the above.
ICHRA Rule #5.
The ICHRA must be defined within
a formal document.
HRA administrators must define the plan within a document that is made accessible to employees and their dependents. While that document can be legally complex, a more simply worded summary plan document (SPD) must also be available. New enrollees in the ICHRA must receive the SPD within 90 days, while all eligible employees need to have it within 120 days after the ICHRA’s formation.
ICHRA Rule #6.
An ICHRA is a Self-funded Group Health Plan and is subject to ERISA and IRS rules.
An ICHRA must adhere to ERISA (Employee Retirement Income Security Act), which requires certain employee communications. As well, just like any HRA, ICHRAs are subject to IRS rules that require that there isn’t discrimination between highly compensated employees (HCEs)/key employees and other employees at a company.
