* Updated June 19,2019*
To expand flexibility for HRAs, the Trump administration asked the Departments of Treasury, Labor, and Health and Human Services to propose regulations to make this a possibility. An executive order from President Trump enlisted the departments to increase availability and usability of HRAs. So in what way do these changes help employers and their staff when it comes to health insurance? For starters, the new regulatory rules create two new HRAs, ICHRA and EBHRA.
When an employer offers traditional group insurance, the employees are confined to specific plans and premium amounts. However, when they choose to offer an Individual Coverage HRA plan, the employers then have complete control over the budget. Furthermore, they can design the plan that best fits the needs of their company. Employers will determine the amount they reimburse as well as which employees are eligible to participate (with the understanding that each employee is treated equally and fairly.) Employees will be able to select their own insurance and receive reimbursement from their employers.
No caps on annual allowance
With QSEHRA plans in 2018, an annual cap is placed at $5,050 for individuals and $10,250 for employees with families. Additionally, allowance amounts are only able to be determined by family size and age, but not by employee class. When choosing an ICHRA plan, the employer can set the allowance amounts for each class and then increase the allowance amounts in each class according to age and family size.
They will meet corporate mandates
The IRS will set specific guidelines to help large employers that are subject to the corporate mandate determine what their minimum HRA contributions should be to meet the mandate. There are some safe harbors that are being set in place to make Individual Coverage HRAs more practical for large employers. They intend to allow large employers to base HRA rates on the business location rather than the employee’s address as well as allowing large employers to estimate an employee’s household wages based on either W-2 wages, rate of pay, or federal poverty line.
Option to provide group insurance policies
Currently, if an employer provides a QSEHRA plan to their staff, they cannot also offer group insurance of any kind. With the Individual Coverage HRA, businesses that offer the ICHRA plans will also have the option to offer a traditional group health insurance policy, but they may not offer both to the same employee class. As an example, the employer could offer a group policy to full-time employees and an ICHRA plan to part-time employees. Keep in mind that a full-time employee would not have access to an ICHRA plan and a part-time employee would not have access to the group policy.
Employees may opt out of individual coverage HRA plans
If an employee participates in an ICHRA, they are not permitted to use any premium tax credits. The good news is that employees are free to opt out of any offered ICHRA. Those who do so would still be eligible for the premium tax credit as long as the HRA’s allowance amount was considered “unaffordable” and didn’t provide minimum value under the ACA. ICHRA is considered unaffordable if the remaining portion an employee has to pay for a self-only silver plan (this is the lowest cost silver plan) is more than 9.86% of their household income.
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 HRA's and the impact they can have on small business.
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.