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retirees and ICHRA, individual coverage HRA

Can retirees participate in ICHRA?

The individual coverage health reimbursement arrangement (ICHRA) has many benefits for employers and employees alike, including greater flexibility, personalization, and cost control. But what happens to ICHRA funds when employees retire? Can they participate in ICHRA instead of a traditional employer sponsored group health plan? It’s good to have this cleared up from the beginning. 

Can retirees participate in ICHRA?

In short, yes! Retirees can participate in ICHRA under the same terms as current employees. Their ICHRA class is determined by the class they would have been included in immediately prior to separation from employer. 

Can retirees make up their own class of ICHRA employees?

While ICHRA allows employers to categorize employees among 11 different classes, retirees cannot be made into their own class or have their own reimbursement amounts.

Is insurance required for retirees to participate in ICHRA?

One thing to keep in mind: Regardless of which category the retiree falls into, anyone who is on an ICHRA plan must have a qualified health plan to receive reimbursements. One of the many benefits of ICHRA is that it allows employees to choose their own health plan for themselves and family members. There are no “networks” to worry about - employees  select a plan that works best for them! 

The good news for retirees is that Medicare is qualifying insurance to participate in ICHRA. Employees must have Part A+ B or Part C to be eligible. This article on Medicare + ICHRA explains the interaction in more detail. 

Does ICHRA need to be offered to all employees who have retired?

ICHRA is required to be offered on the same terms to employees of a given class. So if an employer wanted to extend ICHRA coverage to retirees that had worked full time but exclude part time employees that is acceptable as long as it aligns with the settings of current employees (ie part-time employees excluded from ICHRA benefit).  Employers are not able to handpick which retired employees are eligible to participate in ICHRA, the benefit has to be offered fairly amongst retired employees. 

Avoiding discrimination with ICHRA

Wondering if offering some, but not all, retirees an ICHRA creates the potential for health status discrimination? Good question.

There are many nondiscriminatory reasons which may influence an employer’s decision whether to offer retiree health coverage. For example, it is not uncommon for employers to offer retiree health coverage only to workers that have been with the company at least 5 years prior to retirement.

By following the guidelines mentioned above (same terms, not a separate class) employers can safely include or transition their retirees to an ICHRA and avoid any possible discrimination scenarios.

Still need help?

Take Command is committed to bringing you the latest information on this new type of HRA. Our ICHRA FAQ page is always a hit, or try out our ICHRA guide, which is a good resource to learn more.  When you are ready, talk with one of our team  members who can help you design an ICHRA compliant plan that best suits your needs and the needs of your employees.  


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