What to know about ERISA and Individual Coverage HRAs (ICHRA)

by Ali

Offering employees the power to choose their own health insurance is one of the many benefits of ICHRA. The downside is the numerous regulations to mull through which can give an eager employer a headache. We want to help employers understand what requirements are expected of them when it comes to ERISA and the individual coverage HRA (ICHRA).


What is ERISA? 

The Employee Retirement Income Security Act of 1974 (ERISA) provides minimum standards for employee benefit plans, such as retirement plans and health benefit plans. ERISA sets requirements to ensure that plan interests are protected and it establishes a fiduciary relationship between the benefits plan and plan participants. 

When does ERISA apply to ICHRA?

Since the Individual Coverage Health Reimbursement Arrangement is considered a group health plan, it is subject to ERISA. Employers will want to ensure that their ICHRA plans follow the ERISA standards for notifying employees. 

According to ERISA, covered plans must provide a summary plan description (SPD) which includes:

  • Statement of rights and obligations for plan participants and beneficiaries
  • Eligibility requirements to receive benefits
  • A description of the benefits
  • Explanation of circumstances that may result in disqualification, ineligibility, loss, or forfeiture of any benefits
  • Procedures for making claims
  • Explanation of how the plan is operated

Does ERISA apply to the individual insurance employees purchase?

Because employees are responsible for securing their own individual health insurance from the marketplace (which is highly regulated), the plans employees purchase do not fall under ERISA TITLE 1 (p.218) as long as the following conditions are met:

  1. The purchase of any individual health insurance is completely voluntary for employees
  2. The employer, employee organization, or other plan sponsor does not select or endorse any particular issuer or insurance coverage
  3. Reimbursement for non-group health insurance premiums is limited solely to individual health insurance coverage
  4. The employer, employee organization, or other plan sponsor receives no consideration in the form of cash or otherwise in connection with the employee’s selection or renewal of any individual health insurance coverage. 
  5. Each plan participant is notified annually that the individual health insurance coverage is not subject to ERISA. 

Confused Yet?

As long as employers provide the correct documents to  employees and have no involvement in helping employees to find a plan, ERSIA requirements will be met.  

Trying to navigate all of this insurance jargon and regulations is difficult and time consuming. That’s why finding someone you trust to design and manage your plan is a good idea. Save time and money with a trusted ICHRA administrator like Take Command Health, so you can sleep easy at night knowing that your plan is following the regulations from A-Z.  

About Take Command Health

Take Command Health is a recognized leader in QSEHRA administration and small business HRA tax strategy. We were at the forefront of the new ICHRA administration regulations and responded with our own comprehensive and exclusive research to the proposed regulations. In addition, we were the only HRA provider invited to Washington when the new regulations were passed. Our team is passionate about HRAs and the impact they can have on small business.  

Chat with our team with any questions you may have about HRA tax-friendly benefits or check out our awesome ICHRA FAQ post or our new ICHRA Guide for more information on its background, requirements, and rules.

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Hi, I'm Ali! I wrote this blog because I love helping people decode confusing insurance jargon and understand the fine print. I'm a licensed health insurance professional and specialize in simplifying health insurance for individuals and small businesses. My QSEHRA articles have been featured regularly on Accounting Today, Accounting Web, HRWeb, and other industry publications. I'm also a member of Take Command Health's client success team and a full-time mom. Learn more about me and connect with me on our about us page. Thanks!