* Update June 19, 2019*
The Individual Coverage Health Reimbursement Arrangement (ICHRA) is coming January 2020. That means that starting next year, employers of any size can offer tax-free reimbursements for their employees' medical expenses at varying rates based on class. This is a win-win for everyone, bringing more flexibility and budget control for owners and more access for employees.
Here's what to know about ICHRA eligibility requirements for employees.
Who is eligible for ICHRA?
The most critical requirement for employee eligibility for ICHRA is having an individual health insurance plan that meets Minimum Essential Coverage (MEC).
Like a QSEHRA, ICHRA is only available to those whose coverage meets PHS 2711 & 2713 requirements ($0 preventive and no annual or lifetime limits). The employee can be the primary insurance carrier or the dependent on a family plan. Remember that offering an ICHRA triggers a Special Enrollment Period (SEP) for employees to find a plan outside of the traditional open enrollment schedule.
While not an eligibility requirement, premium tax credits also come in to play here when you consider the financial feasibility for the employee. If the ICHRA is considered "unaffordable" which is calculated based off of the remaining amount an employee must pay for a self-only silver plan (the lowest cost silver plan) on the exchange is more than 9.86% of their household income, then employee can opt out of the ICHRA on a year by year basis and receive their tax credit instead.
Not all ICHRA benefits are created equal
While the only two critical components for eligibility are meeting MEC and foregoing PTCs, it's important to note that all employees aren't necessarily treated equally when it comes to ICHRA reimbursements.
Different employee classes can be awarded different levels of benefits. This is a hallmark characteristic of the new HRA that gives business owners a lot of flexibility with the design.
The employee classes include:
- Full-Time Employees
- Part-Time Employees
- Seasonal Employees
- Employees covered by a collective bargaining agreement
- Employees who have not satisfied a waiting period for coverage
- Non-Resident aliens with no US-based income
- Employees whose primary site of employment is in the same rating area
- Salaried Employees
- Non-Salaried Employees
- Temporary Employees of staffing firms
- Any combination of two or more of the above classes
Furthermore, the allowances can be increased within each class based off of age and number of dependents.
What comes next
Is your company or client going to be a part of this exciting change? Chat with our team with any questions you may have about these new, tax-friendly benefits or check out our new ICHRA Guide for more information on its background, setup process, requirements, and rules.