The individual coverage health reimbursement arrangement (ICHRA) has changed the health care world for business owners and employees alike. Perhaps you don’t own a business, but did you know, if you employ a nanny, housekeeper, driver, etc., you can offer them health reimbursements on a tax-free basis?
That’s right! Read on to discover how the ICHRA makes this possible for household employees.
How does ICHRA work for household employees?
As the name implies, ICHRA is based on reimbursing employees for insurance rather than choosing and administering a plan for them. At a high-level, the way ICHRA works is very simple:
- Employers design their plan, including defining which employees are eligible and establishing reimbursement limits
- Employees purchase the individual plans they want
- Employees submit claims for reimbursement
- Employers reimburse employees for valid claims
There are no limits to how much an employer can offer for reimbursement under ICHRA. This is a big difference than previous HRA models, extending these tax-free benefits to a bigger pool of employers. With ICHRA, employers can offer as much or as little as they’d like as long as it’s offered fairly to each class (i.e., part-time, salaried, remote, seasonal, et. al.).
In addition, employers can choose what they want their ICHRA to reimburse:
- Insurance Premiums Only
- Insurance Premiums + Qualified Medical Expenses
- Qualified Medical Expenses Only
Wondering which expenses are reimbursable? We got you!
Let’s look at an example. You offer your household staff an ICHRA. Your full-time housekeeper and full-time nanny can be offered a higher amount, say $500 a month, and your hourly driver and hourly personal chef can be offered $250, or whatever amount works best for you. Further, you can also vary these amounts within each class by family size and age.
The great part about this is that you can tailor it to fit your household staff and your budget. It’s a great way to show those who you depend on how much they are valued.
Wondering where to start? Here are a few things to keep in mind:
- Your household must have an EIN, or Employer Identification Number. This will essentially allow your home and household employees to be considered a small business in the eyes of the IRS.
- Pick a start date. The first step is pretty easy—establish a start date! Many companies tend to think about benefits on a calendar year basis during open enrollment, but the awesome part about ICHRA is that it can happen any time of year and will trigger a special enrollment period so your employees can find plans on the individual market outside of the open enrollment dates.
- Determine a budget and set allowances. Your next step is to determine how much you’ll give employees to reimburse them for premium costs and medical expenses. You can set a different monthly allowance for varying classes that you choose to include, and can even integrate this option with a traditional group plan if you choose. From there, you can increase allowance amounts based on family size or age if you so choose. And remember, there’s no minimum or maximum limits on contributions!
- Establish legal plan documents. The IRS and Department of Labor have a variety of rules to follow regarding HRAs. Failure to comply with the rules will result in penalties. Your legal plan documents, which will include a formal plan document and summary plan document, must include the ICHRA policies including monthly reimbursement amounts, class structure, claims processes, reimbursement eligibility, and information on HIPAA and other procedures involving privacy.
- Provide resources for employees to purchase individual health insurance. Choosing a health insurance plan on the individual market is a daunting task, especially if this is new territory for your employees. As an employer, you can provide your employees with tools and information to guide their decision making. Just beware, federal rules prohibit employers from being involved in the actual decision making when it comes to choosing a provider or policy.
Choosing their own individual plans puts a lot of pressure on the employees, so our team at Take Command is here to help employees choose the best plan for their family, their specific needs and their preferred doctors.
Show them they are valued with extra perks
Want to offer more benefits but don’t want to break the bank? Offer your household employees a Take Command membership which includes valuable benefits like the ability to call a doctor 24/7 for free, medical bill negotiation, vision and dental discount plans, and pharmacy discounts.
A wife to one and mother to four, Keely does all of the things. She’s also dabbled in personal finance blogging and social media management, contributed to MetroFamily magazine, and is passionate about good food, treasure hunting and upcycling. With a B.S. in Psychology from the University of Oklahoma and a knack for a witty punchline, it’s no surprise that Keely’s social posts are as clever as they get. In her (very little) free time, you’ll find Keely with her nose in a book or trying out a local restaurant with her family.