10. How does the employer report contributions to an ICHRA?
For Form 1095-B, a new "Code G" will be entered to identify the ICHRA as the source of employer-provided coverage. Form 1095-C, Line 14, asks for information about the coverage and the employee, including (1) whether the employee is full-time or part-time, (2) whether the spouse or dependents were offered coverage, (3) whether the ICHRA is affordable by ACA standards for full-time employees and (4) the location used to determine affordability.
1. Does offering an ICHRA satisfy the ACA's employer mandate?
Individual coverage HRAs are group health insurance plans, so can be used to satisfy the employer mandate, as they are deemed to provide minimum essential coverage so long as all participants are actually enrolled in individual coverage or Medicare.
In addition, to satisfy the employer mandate requirements, the HRA must be affordable and meet applicable minimum value standards, and be offered to at least 95% of full-time employees and dependents.
2. What counts as "affordable"?
Generally, affordability is determined similarly to an offer of traditional health insurance coverage — by using the employee's W-2 pay, poverty level and safe harbor related to rate-of-pay in the same manner that previously applied.
To determine affordability, the employer looks to the plan cost minus the amount of the employer's reimbursement via the ICHRA to determine the amount of the employee's cost. That cost cannot exceed 9.78% of household income to be affordable.
The employee's "required contribution" is determined by subtracting the monthly premium for the lowest cost silver plan for self-only coverage of the employee offered on the health insurance exchange for the rating area in which the employee lives from the monthly self-only HRA contribution. For 2024, the required contribution percentage is 8.39% (9.12% in 2023, 9.61% in 2022, 9.83% in 2021 and 9.78% in 2020).
3. Can we still offer traditional group health insurance?
Yes, but only if the employer does not offer integrated ICHRA-individual coverage to one class of employees and group health coverage to others in the same class of employees, with one exception: an employer may generally prospectively offer new hires within a class of employees who are hired on or after a certain date an ICHRA while continuing to offer existing employees within that same class traditional group health coverage.
4. What defines a class of employees?
Permissible classes of employees include part-time employees, full-time employees, seasonal workers, hourly workers, salaried workers, new hires, workers employed or not employed through a temporary staffing agency, employees in the same rating area, employees covered by a collective bargaining agreement in which the plan sponsor participates, employees who have satisfied a waiting period for coverage, and non-resident aliens.
For example, if an employer is primarily located in one geographic area and has a group of employees working in a higher cost area (with respect to the cost of health coverage), the employer might benefit from offering employees in the high-cost location the ICHRA instead of group coverage.
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5. How is class size calculated?
Coverage offered to a class of employees is only permitted when the group is of a sufficient size. Generally, the size requirement only applies if the employer also offers a traditional group health plan to certain employees in addition to the ICHRA.
The employer determines whether a class of employees satisfies the size requirements based on the number of employees in the class offered the ICHRA as of the first day of the plan year (i.e., it is not based on the number of employees who actually enroll and not impacted by changes in the number of employees throughout the plan year).
For employers with between 100 and 200 employees, the class size must be the smaller of 20 employees or 10 percent of the workforce. For employers with fewer than 100 employees, the class size must be at least 10 employees, and for employers with more than 200 employees, the class size must be at least 20 employees.
The minimum size requirement does not apply when the class is based on a geographic grouping that encompasses one or more entire states.
6. Do we have to offer the same reimbursement amount to all employees?
While the ICHRA must be offered on the same terms to members within a given class, variations in dollar amounts are permitted when based on the number of dependents covered under the plan or due to age under certain circumstances.
Employers can also provide a specified percentage of premium costs to employees (which would mean that older employers could receive a larger contribution). It's important to note that the Age Discrimination in Employment Act (ADEA) applies only to employer plans. In the ICHRA context, the employer has no control over the plan — because the employee chooses their own coverage option.
7. What notice requirements do we have to follow with respect to ICHRAs?
An employer offering an ICHRA must provide written notice to each participant at least 90 days before the beginning of the plan year, or no later than the date the ICHRA may take effect.
The notice must contain a description of the basic ICHRA terms, including the maximum dollar amount, any rules regarding pro-ration if the participant is not eligible for the entire plan year; whether dependents are eligible; disclosure of the different types of HRAs and that the particular HRA being offered is an individual coverage HRA; a statement as to ERISA coverage; the date ICHRA coverage will first become effective; the date the ICHRA plan year begins and ends; and the dates the amounts under the ICHRA will become available.
The notice must contain information about the availability of the premium tax credit and the employee's right to opt out of the ICHRA.
8. How do we know employees are spending the money on health insurance?
Reasonable substantiation procedures must be established to ensure that employees actually are enrolled in individual health insurance plans. Employers are permitted to ensure that employees actually use the HRA funds to purchase individual health insurance satisfying ACA minimum coverage requirements — rather than limited or short-duration plans — by relying upon employee attestations.
Employers are not required to look beyond employee attestations to confirm that the employee used the funds permissibly (unless the employer has actual knowledge that the attestation may be false). However, the employer must obtain an attestation for each reimbursement from the HRA.
9. Can employees claim an ACA premium tax credit?
Employees who receive integrated individual coverage via an HRA are generally not eligible for the premium tax credit, However, the HRA program must include an opt-out provision that will allow the employee to claim the premium tax credit. If the employee chooses to opt out because the coverage amount provided is not affordable and then enrolls in individual coverage via the health insurance marketplace, the individual may remain eligible to claim the premium tax credit.
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10. How does the employer report contributions to an ICHRA?
For Form 1095-B, a new "Code G" will be entered to identify the ICHRA as the source of employer-provided coverage. Form 1095-C, Line 14, asks for information about the coverage and the employee, including (1) whether the employee is full-time or part-time, (2) whether the spouse or dependents were offered coverage, (3) whether the ICHRA is affordable by ACA standards for full-time employees and (4) the location used to determine affordability.
1. Does offering an ICHRA satisfy the ACA's employer mandate?
Individual coverage HRAs are group health insurance plans, so can be used to satisfy the employer mandate, as they are deemed to provide minimum essential coverage so long as all participants are actually enrolled in individual coverage or Medicare.
In addition, to satisfy the employer mandate requirements, the HRA must be affordable and meet applicable minimum value standards, and be offered to at least 95% of full-time employees and dependents.
2. What counts as "affordable"?
Generally, affordability is determined similarly to an offer of traditional health insurance coverage — by using the employee's W-2 pay, poverty level and safe harbor related to rate-of-pay in the same manner that previously applied.
To determine affordability, the employer looks to the plan cost minus the amount of the employer's reimbursement via the ICHRA to determine the amount of the employee's cost. That cost cannot exceed 9.78% of household income to be affordable.
The employee's "required contribution" is determined by subtracting the monthly premium for the lowest cost silver plan for self-only coverage of the employee offered on the health insurance exchange for the rating area in which the employee lives from the monthly self-only HRA contribution. For 2024, the required contribution percentage is 8.39% (9.12% in 2023, 9.61% in 2022, 9.83% in 2021 and 9.78% in 2020).
3. Can we still offer traditional group health insurance?
Yes, but only if the employer does not offer integrated ICHRA-individual coverage to one class of employees and group health coverage to others in the same class of employees, with one exception: an employer may generally prospectively offer new hires within a class of employees who are hired on or after a certain date an ICHRA while continuing to offer existing employees within that same class traditional group health coverage.
4. What defines a class of employees?
Permissible classes of employees include part-time employees, full-time employees, seasonal workers, hourly workers, salaried workers, new hires, workers employed or not employed through a temporary staffing agency, employees in the same rating area, employees covered by a collective bargaining agreement in which the plan sponsor participates, employees who have satisfied a waiting period for coverage, and non-resident aliens.
For example, if an employer is primarily located in one geographic area and has a group of employees working in a higher cost area (with respect to the cost of health coverage), the employer might benefit from offering employees in the high-cost location the ICHRA instead of group coverage.
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5. How is class size calculated?
Coverage offered to a class of employees is only permitted when the group is of a sufficient size. Generally, the size requirement only applies if the employer also offers a traditional group health plan to certain employees in addition to the ICHRA.
The employer determines whether a class of employees satisfies the size requirements based on the number of employees in the class offered the ICHRA as of the first day of the plan year (i.e., it is not based on the number of employees who actually enroll and not impacted by changes in the number of employees throughout the plan year).
For employers with between 100 and 200 employees, the class size must be the smaller of 20 employees or 10 percent of the workforce. For employers with fewer than 100 employees, the class size must be at least 10 employees, and for employers with more than 200 employees, the class size must be at least 20 employees.
The minimum size requirement does not apply when the class is based on a geographic grouping that encompasses one or more entire states.
6. Do we have to offer the same reimbursement amount to all employees?
While the ICHRA must be offered on the same terms to members within a given class, variations in dollar amounts are permitted when based on the number of dependents covered under the plan or due to age under certain circumstances.
Employers can also provide a specified percentage of premium costs to employees (which would mean that older employers could receive a larger contribution). It's important to note that the Age Discrimination in Employment Act (ADEA) applies only to employer plans. In the ICHRA context, the employer has no control over the plan — because the employee chooses their own coverage option.
7. What notice requirements do we have to follow with respect to ICHRAs?
An employer offering an ICHRA must provide written notice to each participant at least 90 days before the beginning of the plan year, or no later than the date the ICHRA may take effect.
The notice must contain a description of the basic ICHRA terms, including the maximum dollar amount, any rules regarding pro-ration if the participant is not eligible for the entire plan year; whether dependents are eligible; disclosure of the different types of HRAs and that the particular HRA being offered is an individual coverage HRA; a statement as to ERISA coverage; the date ICHRA coverage will first become effective; the date the ICHRA plan year begins and ends; and the dates the amounts under the ICHRA will become available.
The notice must contain information about the availability of the premium tax credit and the employee's right to opt out of the ICHRA.
8. How do we know employees are spending the money on health insurance?
Reasonable substantiation procedures must be established to ensure that employees actually are enrolled in individual health insurance plans. Employers are permitted to ensure that employees actually use the HRA funds to purchase individual health insurance satisfying ACA minimum coverage requirements — rather than limited or short-duration plans — by relying upon employee attestations.
Employers are not required to look beyond employee attestations to confirm that the employee used the funds permissibly (unless the employer has actual knowledge that the attestation may be false). However, the employer must obtain an attestation for each reimbursement from the HRA.
9. Can employees claim an ACA premium tax credit?
Employees who receive integrated individual coverage via an HRA are generally not eligible for the premium tax credit, However, the HRA program must include an opt-out provision that will allow the employee to claim the premium tax credit. If the employee chooses to opt out because the coverage amount provided is not affordable and then enrolls in individual coverage via the health insurance marketplace, the individual may remain eligible to claim the premium tax credit.
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10. How does the employer report contributions to an ICHRA?
For Form 1095-B, a new "Code G" will be entered to identify the ICHRA as the source of employer-provided coverage. Form 1095-C, Line 14, asks for information about the coverage and the employee, including (1) whether the employee is full-time or part-time, (2) whether the spouse or dependents were offered coverage, (3) whether the ICHRA is affordable by ACA standards for full-time employees and (4) the location used to determine affordability.
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Emily Payne
Emily Payne is director, content analytics for ALM's Business & Finance Markets and former managing editor for BenefitsPRO. A Wisconsin native, she has spent the past decade writing and editing for various athletic and fitness publications. She holds an English degree and Business certificate from the University of Wisconsin.
