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ICHRA plan template: what's required?

If you’re looking for an ICHRA plan document template, you should know that the many rules surrounding the individual coverage health reimbursement arrangement can change from year to year. If keeping up with changing regulations sounds overwhelming, the ICHRA platform from Take Command has built-in, automatic updates to ensure compliance. It will also ensure you have all the ICHRA plan documents you and your employees are going to need. Let's talk about those today.

Why you need an ICHRA plan document

Since HRAs are classified as group health plans by the federal government, an ICHRA is bound by the regulations outlined in ERISA. According to ERISA Section 402, it is mandatory for every employee benefit plan to have a written instrument or plan document that establishes and maintains the plan. Additionally, ERISA requires organizations to make this document accessible to both employees and their families.

Plan sponsors, usually the employer, are responsible for creating a summary plan document (SPD) that provides participants with a condensed overview of the entire plan. While the plan document is written in legal language, the SPD must be written in a way that is easily understandable for the average plan participant.

ERISA § 2520.102-31 provides valuable guidance on creating the Summary Plan Document (SPD) by outlining the necessary components it should contain. These components encompass the various benefits, rights, and obligations that participants have under the plan. With this guidance, employers can ensure that the SPD effectively communicates the key information to plan participants in a clear and comprehensible manner.

While there are no direct consequences outlined for not meeting these requirements, employers should be aware that failing to produce the plan document when requested by ICHRA participants can result in fines imposed by the IRS. It's important to prioritize compliance and have the necessary documentation readily available to avoid any potential penalties.

Also, failure to provide the Summary Plan Document (SPD) to participants within 120 days of the establishment of the ICHRA can result in additional fines for the employer. For new participants joining an existing ICHRA, employers have a 90-day window to deliver the SPD.

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How to set up an ICHRA

  1. Pick a start date.
  2. Set a cancellation date for your group policy (if applicable). This step is only for business owners currently offering group health insurance.
  3. Decide who will be eligible. One of the best parts about ICHRA is that you can divide employees into nine classes to determine what kind of benefit they receive.
  4. Determine a budget and set allowances. There’s no minimum or maximum limits on contributions!
  5. Establish legal plan documents. (That’s what we’re talking about today!)
  6. Communicate your new benefit to employees.
  7. Provide resources for employees to purchase individual health insurance.

For more details on this, check out our blog post on How to Set up an ICHRA. 


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As the only ICHRA administrator that also offers health insurance on the individual market, Take Command can provide the best on- and off-market options for employees based on their needs, budget, preferred doctors and prescriptions.

ICHRA Plan Template 2024

There are three key legal documents that must be included in your ICHRA plan document. Here's what to include for your ICHRA plan template in 2023.

Legal Agreement

The legal agreement establishes the ICHRA for the employer and should include:

  1. Named fiduciaries and plan administrators and their responsibilities
  2. Eligibility requirements for the ICHRA
  3. Effective dates of participation
  4. Description of benefits provided and excluded
  5. How the ICHRA is funded and how it makes payments
  6. Claims procedures
  7. HIPAA privacy officers and rules relating to the use of protected health information (PHI)
  8. Information on federal mandates
  9. The procedure for amending the plan
  10. The procedure for plan termination

 

Responsibilities of plan administrators and fiduciaries

The ICHRA plan documents should clearly identify the individuals who will act as fiduciaries. These fiduciaries play a crucial role in overseeing and managing the administration of the ICHRA, ensuring that it operates smoothly and effectively. By assigning specific individuals as fiduciaries, the plan can benefit from their expertise and accountability in making decisions that align with the best interests of the plan participants.

Once these individuals are designated in the plan documents, they willingly take on the responsibility of fiduciary duty for ICHRA participants. This entails prioritizing the best interests of the plan participants and ensuring that only reasonable medical expenses are covered.

Additionally, it is important for the ICHRA plan document to designate a plan administrator who will have specific powers and responsibilities. This ensures that the administration of the ICHRA runs smoothly and efficiently. The plan administrator will have the authority to interpret the plan, draft participant forms, communicate important information to participants, sign administration documents, maintain relevant plan data, and appoint individuals to assist in plan administration services. By clearly identifying the plan administrator and outlining their powers in the plan document, there is accountability and expertise in managing the ICHRA for the benefit of all participants.

Plan administrator powers include:

  • Interpreting the plan
  • Drafting ICHRA participant forms
  • Communicating to employees about ICHRA 
  • Signing documents for plan administration
  • Maintaining relevant plan information
  • Appointing others to assist in plan administration support

Keep in mind, the company is named as the fiduciary and plan administrator in most cases.

 

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ICHRA Eligibility 


Clearly outline the eligibility requirements for ICHRA participants in the plan document.

In order to participate in the ICHRA, it is mandatory for all participants to have individual health insurance. However, employers have the flexibility to determine eligibility based on the 11 employee classes mentioned earlier.

Remember, eligible employees can include their spouses and dependents in the ICHRA, allowing them to also participate in the benefit.

 

Start dates


The plan document should clearly outline the specific dates when eligible employees can begin participating in the ICHRA, including any waiting period that may be imposed by the business.

Employers have the flexibility to set the start date for employees to participate in the ICHRA, allowing them to choose an effective date that aligns with their start date or up to 90 days after their date of hire.

 

Description of benefits provided (and excluded benefits)


The plan document should clearly specify which expenses can be reimbursed through the ICHRA and which expenses are not eligible for reimbursement.

The ICHRA has the flexibility to cover expenses classified as "medical care" according to IRS Section 213(d). However, employers have the option to specify any exclusions by providing a detailed list in the plan document. This allows employers to tailor the coverage to meet the specific needs of their employees.

In this part of the legal document, employers should also provide details about the monthly allowance amounts that employees can receive based on the 11 employee classes set by the employer.

 

ICHRA funding and payment information


The plan document should outline how payments are made to the insurance carriers and how the reimbursements will work for the ICHRA.

The funding and payment process of the ICHRA will vary depending on how the organization chooses to administer the benefit plan. While there is no obligation for the ICHRA to be pre-funded, it's worth noting that certain third-party administrators (TPAs) may require pre-funding as part of their services.

The organization retains the funds until the employee's expense has been verified and approved for reimbursement, ensuring a smooth and efficient process.

 

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Document claims procedures


The plan document should establish and adhere to fair procedures regarding the claims process. In the case of an ICHRA, a "claim" refers to a reimbursement request submitted by a participant.

In order to adhere to the regulations set forth by ERISA, it is necessary for ICHRA plan documents to establish protocols that govern the procedures related to the plan.

This would include:

  • How reimbursement claims are filed
  • How administrator will notify employees of processes and decisions as they relate to claims
  • How the business will handle appeals of denied claims
  • Business owners have freedom in crafting these procedures, but ERISA offers some specific guidelines.

 

HIPAA and PHI Information


If the ICHRA is provided to a company with less than 50 full-time employees, it is not obligated to adhere to the majority of HIPAA regulations.

Nevertheless, the ICHRA is still bound by the regulations set forth in the HIPAA Privacy Rules, which dictate the circumstances under which the plan can disclose protected health information (PHI) to the company.

To meet the requirements, the plan document should designate individuals or a group as HIPAA privacy officers. These individuals, who are typically the plan administrator, will have access to participants' PHI and will ensure compliance with HIPAA regulations.

The plan documents should also include provisions that govern how protected health information (PHI) is used and disclosed in accordance with the HIPAA Privacy Rules. Furthermore, it should encompass measures to protect PHI in accordance with the HIPAA Security Rules.

If an ICHRA is being provided to organizations with over 50 employees, it is essential to also comply with the remaining sections of HIPAA.

 

Federal mandate information


The ICHRA plan document should provide clear guidance on how the ICHRA complies with federal mandates such as the Family and Medical Leave Act (FMLA) and the Uniformed Services Employment and Reemployment Rights Act (USERRA). The organization's size will largely determine how the ICHRA aligns with these mandates.

 

Documenting how to make changes to the ICHRA plan


The plan document should provide a clear roadmap for the organization in case of any amendments to the plan. It should identify the key individuals who have the power to make changes and establish a streamlined process for communicating any important modifications to the employees.

As per ERISA regulations, it is mandatory for businesses to promptly notify participants about any amendments made to the ICHRA plan. Participants should be informed no later than 210 days after the end of the plan year in which the amendment was implemented. However, if the amendment significantly diminishes the benefits or services offered by the ICHRA, participants must be notified within 60 days.

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Documenting the procedure for plan termination


The plan document should provide comprehensive information on the rights of both the business and the participants in the event of ICHRA termination. It is crucial to outline how the plan assets will be managed and handled during the termination process.

Plan Summary

Employees must be provided a written notice in the form of a Plan Summary. The Plan Summary is a condensed, user friendly explanation (psst: go easy on the legal-ease!) of the ICHRA benefit and how it works. This is a great place to include information on the different classes of benefits and a helpful link to the Take Command platform if employees need help choosing the most affordable plan based on their unique needs, doctors, prescriptions, etc. Giving employees as many resources up front will ease the transition, especially if they are shopping on the individual market for the first time.

ICHRA Employee Notice

Since the Individual Coverage HRA requires employees to purchase an ICHRA qualified plan for themselves (as opposed to picking a tier option from an employer sponsored group health plan), the employee notice is designed to guide employees in the process of purchasing health insurance from the marketplace which can be confusing if they haven't done so before. ICHRAs must provide a 90 day notice to eligible employees regarding the ICHRA and its interaction with premium tax credits and of the qualifying 60 day Special Enrollment Period (SEP) that is activated when an employee gains access to ICHRA.

The ICHRA Employee Notice will need to include the following information:

  1. Permitted benefit amount per employee & ICHRA start date for employee.
  2. An opt-out provision for the employee
  3. An explanation of potentially utilizing a premium tax credit if the employee opts out of ICHRA and the ICHRA allowance is deemed unaffordable.
  4. An explanation of what happens with the premium tax credit if the employee accepts to participate in ICHRA.
  5. The employee will need to inform the health insurance Exchange of ICHRA if they apply for APTC.
  6. A statement that ICHRA is not QSEHRA.
  7. Contact Information for employees to contact for help regarding their ICHRA.
  8. Statement that new access to ICHRA qualifies employees and dependents to a Special Enrollment Period (SEP) to purchase insurance from the Exchange for 60 days.

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Looking for help with your ICHRA plan template?

Does this sound confusing? Don't worry. That's where Take Command's platform can help. This post walks you step-by-step through ICHRA administration, and just might convince you to let Take Command do the heavy-lifting and paperwork for you!

We'll handle all the accounting and legal legwork, take care of onboarding each of your employees, and make tax time easy and painless.

You'll never have to hassle with receipts or worry about setting up a health plan again.

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Additional resources →

If you have any questions, just chat with us on the bottom right hand corner of your screen. We're here for you! 

This post was originally published in 2021 and has been updated to reflect the latest regulatory and policy changes in 2024.

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