The new Individual Coverage HRA (ICHRA) lets you help employees with their health care costs without fear of ACA penalties. Starting January 1, 2020, employers can offer this new ICHRA.
The ICHRA allows you to
The ICHRA is a plan for employees. It’s not for the owners of partnerships, proprietorships, or S corporations.
ICHRAs are available only to employees enrolled in
If you already offer a traditional group health plan, you cannot offer an ICHRA to the employees who are eligible for the group plan. Employers are legally barred from giving employees a choice between a group plan and the ICHRA.
But you can offer a traditional group health plan to some classes of employees and the ICHRA to other classes of employees. Classes may be distinguished on the following factors:
Minimum class size requirements apply if you are offering a traditional group health plan to some employees and the ICHRA to other employees. The minimum class sizes are
Integration with Cafeteria Plans
What happens if the reimbursement amount you provide is insufficient to cover an employee’s premiums? Can you allow the employee to pay the balance pretax through a cafeteria plan?
Yes, but only if the employee has a non-Exchange health plan. The tax code prohibits employees from making salary reduction contributions to a cafeteria plan to purchase coverage offered through the Exchange. But if the employee has a non-Exchange plan, this is permissible, subject to the existing rules that govern cafeteria plans.
The Clock Is Ticking
Employers can start offering ICHRAs on January 1, 2020. You don’t need to provide the 90 days’ required notice in the first year, so you still have time to get your plan in place before January 1.
But keep in mind that your employees will need to obtain individual insurance coverage and many may need to use the open enrollment period that runs from November 1 through December 15. This means you should have your notice to the employees before November 1 if you want your ICHRA effective on January 1, 2020. We have a model notice that you can use, and it includes information on Exchange enrollment.
The new law provides that the individual health plans purchased by your employees are not subject to ERISA, provided the following safe-harbor requirements are met:
If you are interested in the ICHRA, you need to move quickly.