If you’re planning to take advantage of the latest and greatest HRA to hit the market (the individual coverage HRA), you may have questions about some of the finer points, like how an ICHRA might interfere with your premium tax credit (PTC) and whether or not you can opt out of the HRA. If so, this post is for you.
Long story short, you can’t benefit from both an ICHRA and PTCs at the same time - that’s basically like double dipping.
But, unlike QSEHRA contributions, which decreases PTCs dollar for dollar without giving employees any choice in the matter, you can opt-out of an ICHRA IF PTCs are more favorable, IF the ICHRA is deemed unaffordable, and IF you are eligible for the PTC to begin with.
Wondering what that means?
How to determine if your ICHRA is affordable
ICHRA is considered “affordable” if the remaining amount an employee must pay for a self-only silver plan on the exchange does not exceed 1/12 of their household income.
If the individual coverage HRA offering is deemed “affordable” based on the formula above with your household income numbers, then you cannot accept a premium tax credit. If ICHRA is deemed “unaffordable,” you can choose to decline the ICHRA and accept the premium tax credit.
Don’t worry if the math sounds a little complicated, we invented an ICHRA affordability calculator that will do the math for you.
In the meantime, you can learn more about this in our post that addresses ICHRA, affordability, and premium tax credits.
And remember, just because the ICHRA is affordable for some of your coworkers doesn't mean that it's affordable for you. You'll need to calculate affordability based on your family income numbers.
When you can opt-out of an ICHRA
Individual coverage HRAs must provide participants with one advance opportunity to accept, or opt out of, the ICHRA for each plan year, but the ICHRA may not provide participants with multiple opportunities to opt into, or out, over the course of the plan year.
This is generally consistent with employees’ ability to decline traditional group health plan coverage that is not affordable or does not provide MV in order to claim the PTC, if otherwise eligible.
Still have questions?
We've got an in-depth ICHRA Guide that we've created just for you, with specific examples of determining affordability. You might also benefit from our ICHRA FAQ page. Don't hesitate to reach out to our team for more information! We are here to help.