Are you the owner of a non-profit business, looking for a more affordable way to offer your dedicated staff the benefits they deserve? The individual coverage health reimbursement account (ICHRA) may be a good alternative for you! This HRA allows you to reimburse employees tax-free, is easy to set up and administer (especially when you enlist the help of Take Command Health!), and is customizable. Let’s walk through some of the particulars of this one.
Affordable health insurance for non-profits
The nonprofit sector continues to trend upward, with more than 1.5 million registered nonprofits in the country today. A new model of benefits is gaining traction for nonprofits across the country as an alternative to traditional, pricey, one-size-fits-all health plans.
The most important (and probably the coolest) thing about ICHRA is that it allows nonprofits to reimburse employees tax-free for individual health insurance premiums for qualified health plans and medical expenses.
This is a big deal because nonprofits can now get the same favorable tax treatment as big company group health plans but with a lot less hassle.
It also enables nonprofits to adopt a strategy called "defined contribution" which is much simpler than hassling with group plans and is proven to be much more efficient, affordable, and predictable. Nonprofits can now give their employees a fixed dollar amount each month, say $300, and each employee can then shop for the plan that fits his or her needs the best. Samantha can choose a Blue Cross plan for her doctor, Robert can get Aetna to cover his prescription, and Betsy can stay on her husband's group plan. Gone are the days of comparing quotes from each insurance company or the headache of trying to get everyone what they want without breaking the budget! And employees end up happier too.
Defined contribution health benefits allow nonprofits complete control over the costs of the health benefits, creating predictability with the health benefits budget. For example, with defined contribution health benefits:
- There are no minimum amounts to contribute (the nonprofit decides the amounts of the defined contribution allowances).
- Costs are not incurred until employees receive reimbursement
- Pre-funding accounts are not required
- Unused funds stay with the nonprofit
Employee classes are part of the magic of ICHRA. Employers can design unique benefit solutions to fit their workforce. For example, employers could offer $500/mo to full-time employees and $200/mo to part-time employees.
ICHRA classes are broken down into 11 unique groups:
- 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
- Salaried Employees
- Non-Salaried Employees
- Temporary employees of staffing firms
- Non-Resident aliens with no US-based income
- Employees in the same geographic rating area
- Any combination of two or more classes from above.
If your nonprofit is concerned about hiring and retaining full-time employees but can't afford benefits for part-time employees, then your benefits budget will be best spent on offering an ICHRA to full-time employees only. You can then set different allowance ratings for full-time single employees, full-time married employees, and full-time employees with families. You can exclude: part-time or seasonal.
With ICHRA, benefits have to be distributed fairly to employees that fall within each class, but each class can be broken down further by age and family size. That means that employees with families can be offered a higher amount per month and rates can be scaled by age. This makes sense given that family health expenses cost more than singles, and health insurance costs rise with age.
Do you qualify?
In order to participate in the ICHRA, the following criteria need to be met.
- An organization can be a 5-person startup, a midsized 50-person team, or a 500-person corporation. ICHRA is a scalable benefit for all sizes of businesses.
- There are no annual contribution caps. That means the sky’s the limit for this tax-friendly benefit.
- An employer can choose to treat different classes of employees differently based on different available class distinctions. Everyone does not have to be treated equally across the board.
- For employees to participate in ICHRA and receive reimbursements, they must be covered by a qualified individual health plan. For a plan to be considered “qualified,” it must meet two primary requirements:
Hopefully this gives you an idea of how the ICHRA can be beneficial to your nonprofit business. You don't need us to tell you how important for nonprofits to be efficient with their budgets. Since a lot of your operating budget is made possible by generous donors or grants, why not let spend less on administration, and more on pushing your mission forward. For more information, check out our ICHRA FAQ or our comprehensive guide. And as always, Take Command Health is ready to answer all of your questions!