An ICHRA is a type of HRA that allows employers to reimburse employees for qualified medical expenses, including monthly premiums for medical, dental, and vision. ICHRAs can also include 213d expenses as an add-on at the group’s request.
Q: How do ICHRAs work?
Employers establish a budget for benefits, employees choose their health plan, and the employer reimburses them for eligible expenses incurred.
Employers can choose what they want their ICHRA to reimburse. They can choose:
- Insurance premiums only.
- Insurance premiums and qualified medical expenses (213d).
When offering insurance premiums only: The employer can choose to elect from medical, dental, vision premiums, or any combination of those. ICHRA can also be used to pay for Medicare (but Medicare cannot be its own funding class).
When offering insurance premiums and 213(d) expenses: Employees must have active coverage for any month they incur a 213(d) expense for it to be eligible. If elected by the employer, ICHRA can reimburse any eligible 213(d) expense.
The list of eligible expenses is outlined in the IRS Publication 502 but includes items such as: Doctor visits, co-pays, prescriptions, over-the-counter drugs, dental procedures, hospital bills, vaccines, lab tests, etc.
Q: What are the requirements for enrollment in an ICHRA?
The participant must fall into one of the designated classes established by the group. The participant also must have an ICHRA-compliant individual insurance plan.
Q: What is needed for an ICHRA prior to the plan start date?
The ICHRA 90-Day Notice should be provided to eligible employees 90 days before the ICHRA starts. This notice helps employees make an educated decision to either participate in the ICHRA or decline coverage.
Q: Can an employee contribute to an ICHRA?
No. ICHRAs are 100% employer funded. If the group wants their employees to be able to make pre-tax contributions towards premiums, they will need to add a Premium Reimbursement Account (PRA).
Q: What is needed to add a Premium Reimbursement Account (PRA) account?
If a group adds a PRA, it must be covered by a POP plan to allow for pre-tax contributions. This does not apply to groups only with an ICHR, as POP is strictly for employee contributions. Employers can purchase a cafeteria plan on their own or at epopdocs.com for a fee.
We cannot add POP verbiage to their ICHRA documents. The POP verbiage can only be added to FSA/DCA docs because the FSA, DCA, and POP are all cafeteria plans that involve employee contributions. That's different from the HRA documents that are employer contributions. Therefore, the group will have to purchase POP docs separately.
Q: Is ICHRA COBRA eligible?
Yes. Per the IRS, ICHRAs are considered a health plan and should be added as a COBRA benefit for COBRA-eligible employers.
Q: What are the size requirements for classes under an ICHRA?
When an employer offers a group plan to some employees and an ICHRA to other classes, the ICHRA is subject to Class Size Minimums. Salaried, Non-Salaried, Rating Area Class, Full-Time, and Part-Time are subject to these class size minimums. For those listed classes for groups that also offer a group plan to other employees, class sizes are as follows:
- If the employer has less than 100 employees, each class size offered must have 10 minimum enrollees.
- If the employer has 100-200 employees, each class size offered must have at least 10% of their employee count.
- If an employer has 200+ employees, each class size offered must have 20 minimum enrollees.
Q: Can owners participate in an ICHRA?
Certain owners can participate depending on the legal setup of the company. C-corp and non-profit owners can participate. S-corp owners are not eligible.
Q: How much must an employer contribute to meet the Minimum Value requirements?
The employer must contribute enough so that an employee can purchase the lowest-cost silver plan in their market and not pay more than 9.12% of their income out of pocket.