Individual Coverage HRA
Introduced in 2020, the Individual Coverage HRA (ICHRA) allows Employers who either do not offer a Group Health Plan or who do not offer one to every employee class to provide funds to employees to purchase individual health insurance coverage and pay for 213(d) qualified expenses.
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Eligibility
Employers
An Employer cannot offer an ICHRA and a Group Health Plan to the same employee. The Employer may use classes to offer ICHRA and GHP to different types of employees.
Participants
- Benefits are tax-free only if covered by a health plan that provides minimum essential coverage (MEC).
- To be eligible, an employee cannot be offered a Group Health Plan.
Permitted Classes
An Employer may divide employees into classes to offer an ICHRA instead of a Group Health Plan to a specific class of employees.
- Full-time employees
- Part-time employees
- Seasonal employees
- Salaried workers
- Employees working in the same geographic location
- Employees covered by a collective bargaining agreement
- Employees who have not satisfied a waiting period
- Non-resident aliens with no U.S.-based income
- Temporary employees of staffing firms
Class Size Limitations
Classes must meet the below minimum sizes to be eligible.
Employer Size
Minimum Class Size
Fewer than 100 employees
10
100-200 employees
10% of employees
More than 200 employees
20
Advantages of an ICHRA
Employers
- Employers save on premiums by not offering a Group Health Plan.
Participants
- Employees receive tax-free reimbursement to purchase individual coverage or for 213(d) qualified expenses.
Versus Qualified Small Employer HRA
The ICHRA is similar to a Qualified Small Employer HRA (QSEHRA). Below are the key differences.
ICHRA
QSEHRA
Premium reimbursement
✓
✓
213(d) medical expense reimbursement (optional)
✓
✓
Available to Employers of all sizes
✓
X
Subject to contribution limits
X
✓
Employees may opt out to receive full premium tax credit
✓
X
How it Works
For Employers
The Employer defines the terms of the QSEHRA and enrolls new employees.
ICHRA funds may be available to employees on the first day of the Plan Year (or on a monthly or quarterly basis).
EMPOWER administers the Plan and issues reimbursements to employees to purchase coverage or pay for qualified medical expenses.
For Participants
Employees are typically automatically enrolled in the QSEHRA.
Participants purchase individual coverage or pay for medical expenses with their own form of payment.
Participants file claims to EMPOWER with a receipt for coverage or service. EMPOWER reimburses claims conveniently from the Employer’s bank account.
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