Question 1

What is an ICHRA and how does it work?

Accepted Answer

An Individual Coverage HRA (ICHRA) is an employer-funded health reimbursement arrangement that allows employers to reimburse employees tax-free for individual health insurance premiums and qualified medical expenses. Unlike traditional group health plans, employees purchase their own individual coverage on the marketplace or directly from insurers. The employer sets a monthly reimbursement amount by employee class. ICHRAs were created by IRS regulations effective January 1, 2020.

Question 2

Is an ICHRA right for my company?

Accepted Answer

ICHRAs work best for employers with: (1) geographically dispersed workforces where a single group plan is inefficient; (2) part-time or variable-hour employees; (3) employees who prefer individual plan choice; (4) employers seeking predictable, fixed health benefit costs; (5) small employers (under 50 FTEs) who are not subject to the ACA employer mandate. ICHRAs are less suitable for employers with a homogeneous workforce in a single location where a group plan provides better value. The ICHRA Analyzer evaluates your specific situation.

Question 3

How does ICHRA affordability work under the ACA?

Accepted Answer

For applicable large employers (ALEs), an ICHRA is considered affordable if the employee's required contribution for the lowest-cost silver plan in their rating area does not exceed 9.02% (2026) of their household income. ALEs must use the ICHRA affordability safe harbor to determine compliance. Employees who receive an affordable ICHRA offer are not eligible for marketplace premium tax credits.

Question 4

What are ICHRA employee classes?

Accepted Answer

ICHRAs allow employers to offer different reimbursement amounts to different classes of employees, including: full-time employees, part-time employees, seasonal employees, employees covered by a collective bargaining agreement, employees in different geographic locations (rating areas), employees in different waiting periods, and non-resident aliens. Employers cannot discriminate within a class based on health status.

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